Do low P/E ratios mean bargain buys?

[KopiKat]

A lot of investors are "book smart" investors, they only looks at the numbers but rarely the qualitative aspects, such as what is the management like? The problem with numbers is that while there is auditing and all, numbers can always be fudged by a expert numbers player. This has been shown time and time again.

Each management has a particular style of running their company / organization, understanding how the management runs the company, their track record , etc helps you understand and trust the decisions they make. Some run a risky game, some are conservative, some are bottom line oriented and that's all they care about, some are employee oriented and believe through that, they can achieve more etc...etc...etc...

Ultimately, you can crunch all the numbers you want, but a bad management can in a second turn a good company into a bad one by the decisions they make and vice versa.

Agree?

Hi Flinger,

While I do agree with your observations and comments, I must emphasize that assessing Management is pretty tough. I am sure d.o.g. (in his job) has access to many high-profile managers and CEOs and it's not always that obvious which are hiding fraud, which are incompetent or which are candid. I myself have been to a fair share of AGMs and met up with Management and CEOs, and also interacted with many top level people in my job capacity; all I can say is that it is hard to discern dishonesty and lack of integrity just from a few meetings. At most, you can tell if they are competent or incompetent in the way they allocate capital or conduct operations, but it's tough to gauge if Management is actually hiding something.

That's why even though I fully agree with the methods ascribed by Philip Fisher in 'Common Stocks and Uncommon Profits', I'm constrained (call me lazy) at this point in my life (already no social life as my time is dictated by my 'bosses' - my young kids).

At most, I try to visualise/imagine the type of management from Financial Reports, News and Analysts' Reports. For eg. when it comes to debts, whether they are conservative/aggressive and in whatever they are doing, whether it's for the shareholders' interest or their own interest (esp. for REITs and other Trusts). As a long term holder for some stocks, I think I'm able to build up a quite good picture or get a good feel after a few years, esp. if the CEO don't get changed every 1-2 years.