Growing Rich - Arabictrader.com

KIRK KAZANJIAN
Then, like now, I didn’t ask just basic questions about the near term.
I wanted to know things like, What’s your strategy? Where do you
want to be in three to five years? How are you going to get there?
What tactics will you use? What are some of your most important
milestones? What are you spending on capital, versus what you’re
generating in cash flow? What are your financial needs, if any? It’s
important to meet management because companies are made up of
people. Leadership is vital to success. To me, the people who run the
company are what make all the difference.”
This is in contrast to the conventional thinking on Wall Street,
which seems to suggest that only today’s numbers matter. Momentum
players can care less about the background of a company’s CEO. Many
money managers can’t even tell you what products the companies in
their portfolios make. They simply own these stocks because quarterly
earnings are going up. This kind of short-term thinking has never
made much sense to Davis. “To do proper fundamental analysis, you
must understand the business you’re investing in,” he maintains.
“Winning companies are made by good people. A stock is a company,
not just a piece of paper. So I evaluate the entire business rather than
poring over momentum charts. What you’re really doing is becoming
a partner in the business. That stock you purchase represents fractional
ownership in the company. The people running the show are your
partners. In any business venture, you are certainly going to want to
know who your managing partners are. I grant you that over a threemonth
or even a yearlong period, it probably doesn’t make much
difference. But over a ten-year period, I think it does. My father used
to say, ‘You need to meet the management so you can figure out
whether they are doers or bluffers.’ That’s really the purpose of doing
on-site inspections.”
DOERS AND BLUFFERS
Separating those who can tell a good story from those who really
mean what they say is no easy task. It often takes more than one
meeting. “Wall Street is obviously more sophisticated now than it
used to be,” Davis points out. “In my father’s time, it was extremely
rare for an investment manager to go out and visit his holdings. Dad
did it with the insurance stocks and made a killing. I naturally gravitated
to that same thought process. I figured I could better understand
96