Chapter 4. Invest Like an Owner
4.1 Ownership and alignment
Stewardship is critical to value investors because it has an enormous effect on intrinsic value. If the business’ assets are misused or stolen, or the reported numbers are not real, any assessment of the business’ worth becomes almost impossible. In the worst of such instances, no price is too cheap.
Unfortunately, some ‘value’ shares are dreadfully managed, while others are outright frauds. This is more common than one might imagine. In recent years, irresponsible or fraudulent management has proved a big problem for many value investors, and especially some large quant funds.
The number of ways unscrupulous managements can steal from or deceive shareholders is infinite. What makes ...