How To Take Your Investing Strategy to the Next Level

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The most important key to investing in solid companies that will bring you consistent returns is also the most simple: look for companies with great management teams. The simple guideline outlined here will help you with the most critical aspect on your search for home-run investments. (full video transcript below)

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Full transcript:

The search for great leaders starts with the following four questions:

1. Do they have a great paper trail?

What better way to judge management than by business results?

Many years of sustained and profitable growth is a very good indicator of a solid business.

2. Is there a focus on return on capital?

A focus on return on capital tells us they're focused on the right things.

Namely, earning the best risk-adjusted returns possible on the money we've entrusted them.

3. Do they have a shareholder-friendly pay policy?

What matters here isn't the absolute amount of money they make...it's the guidelines that govern how they earn it.

What kinds of targets do they have to meet to earn their bonuses?

Management should be rewarded only for making our stock more valuable. That's it.

In 2007, Google CEO, Larry Page, dropped his salary to $1 and is compensated by stock options and performance based bonuses.

This ties compensation to performance. If the company does well, he gets paid

4. Do they have a personal stake in the business?

Always look for owner-operators: teams that own a ton of their own stock.

If the majority of their net worth is tied up in stock, you can be sure their interests are fully aligned with yours.

They will work not only harder, but smarter. And the odds of them doing something stupid with your (and their) money goes down tremendously.

Evaluating the people at the helm of your investments is a critical piece of the intelligent investing puzzle.

By insisting on the best combination of business, people and price, the odds of success become stacked in your favor.

Видео How To Take Your Investing Strategy to the Next Level канала Daily Reckoning