When we consider at what companies we should
look for a position in a competitive industry, what
factors should we consider?
Rumor? Ask someone older or more experienced
than us? Data? There are so many measures–What
Consider looking into a couple of things:
1. Earnings per share
2. Management team’s long term performance.
For we need to realize that when we go to work for
a company we are making a significant investment
in that company, and the industry it is in.
The WSJ reported one measure to consider
is “diluted earnings per share,” that separates out
performance from complicated financial dealings.
The company’s Management team’s long term
performance is a second factor. On the same
page of the paper told the story of Michael
Mauboussin who has written about the “paradox of
skill.” Over the short run, luck and skill play
significant roles. Luck tends to even out in the
longer term and is less of a factor. Skill in
decision-making revealed in financial decisions and
directions companies’ management teams lead their
companies, the challenges they have faced and
weathered is a noteworthy measure.(Look at
investment firm reports, like Fidelity Investments.)
In addition, Mauboussin assesses “streaks in almost
any endeavor” to be a “combination of above-average
skill and above-average luck.” While all the positive
streaks are held by skillful, but not all skilled have
streaks (for not having luck fall their way).
Thus, when a very skillful person says she was just
lucky, there is an element of truth about it.