The Company You Keep

#investors

Time spent with company management can yield valuable insights, but can also lead down the path of personality and away from data-based decisions. To avoid bias and navigate those two pieces in a balanced way, follow a consistent process and do a lot of work up front.

---

As investors, we allocate a lot of time for meeting with companies. And the underlying view driving this – that the humans on top of these giant enterprises, managing and employing hundreds if not thousands of other humans, will provide deeper operational and strategic insights into a business - is sound. Tragically, however, it is also a materially weak shortcut to doing the work required to understand where and why a stock trades the way it does.

If we lean on what management says too much, we might easily misplace the where and the why. These leaders and their IR counterparts are often highly effective communicators. They have risen to the top of the crop of a large cohort of people in corporate America. Typically, that means somewhere along the line, they have notched at least one or two operational wins. And yet, they are humans. They come complete with a requisite set of foibles, blind spots, and, of course, biases. Occasionally, I have even seen them brandish their self-awareness to flag one or two of these things in a moment of tribute to you, the investor. By letting you in a little bit, you can forge a deeper understanding of how the plumbing really works at said enterprise. It makes you better. Or does it?