1.
The managements of both Litton and Ingalls knew from the start that they had bitten off far more than they could chew and/or swallow
2.
This is, of course, entirely contrary to the stated goal of government managements, which is “to keep healthcare costs from increasing out of control
3.
I have found no reference that reports any reduction of costs in programs that political managements sponsored, started, or ran by the approaches of federal government (or State governments for that matter)
4.
allowed me the latitude to interact with the managements of these entities and find
5.
managements now often reflecting the new
6.
As he was being helped in the rehabilitation center in terms of psychotherapy an psychiatric treatment, other managements as physical exercises and fitness as sports , educational intervention, spiritual regeneration, psychodrama , 12 steps and other uplifting therapies
7.
Past managements had forgotten them; palace revolutions had taken no notice of them; the history of France had run its course unknown to them; and nobody recollected their existence
8.
Whether there is a sheep-like mentality in business, whether financial advisers then see the chance of income and urge their clients to grab a share of what is left, or whether managements really do fear being left behind, the speculation quite often becomes fact
9.
Graham was particularly mistrustful of executives (he did not like to visit managements for this reason)
10.
On the other hand, some managements, especially those in struggling industries, would benefit their investors by returning capital to them rather than reinvesting in the business at low rates of return
11.
The rank and file of stockholders will give such policies their support, either because they are individually convinced that this procedure redounds to their advantage or because they accept uncritically the authority of the managements and bankers who recommend it
12.
It is customary to commend managements for “plowing earnings back into the property”; but, in measuring the benefits from such a policy, the time element is usually left out of account
13.
The result would be to subject dividend policies to greater scrutiny and more intelligent criticism than they now receive, thus imposing a salutary check upon the tendency of managements to expand unwisely and to accumulate excessive working capital
14.
(Such moves are decided upon by managements and ratified by the stockholders as a matter of course
15.
The basing of common-stock values on reported per-share earnings has made it much easier for managements to exercise an arbitrary and unwholesome control over the price level of their shares
16.
Whereas it should be emphasized that the overwhelming majority of managements are honest, it must be emphasized also that loose or “purposive” accounting is a highly contagious disease
17.
On comparatively rare occasions, managements resort to padding their income account by including items in earnings that have no real existence
18.
We do not imply that corporate managements are not to be trusted
19.
Managements are naturally loath to return any part of the capital to its owners, even though this capital may be far more useful—and therefore valuable—outside of the business than in it
20.
Wars against corporate managements take time, energy and money
21.
Managements have succeeded very well in avoiding these questions with the aid of the time-honored principle that market prices are no concern or responsibility of theirs
22.
It follows that the responsibility of managements to act in the interest of their shareholders includes the obligation to prevent—in so far as they are able—the establishment of either absurdly high or unduly low prices for their securities
23.
These facts, thus briefly stated, illustrate the vicious possibilities inherent in permitting managements to exercise discretionary powers to purchase shares with the company’s funds
24.
The relationship between stockholders and their managements, after undergoing many unsound developments during the hectic years from 1928 to 1933, have since been subjected to salutary controls—emanating both from S
25.
Buffett, a student of Graham and Dodd’s at Columbia in the 1950s, had, by the early 1980s, evolved from being purely a balance sheet investor to being an investor who was seeking companies with exceptional business franchises that were run by honest, capable, and shareholder-friendly managements
26.
Graham and Dodd—and Buffett—are properly concerned with the tendency of some managements to cling tightly to corporate assets, to withhold dividends, and to make acquisitions whose sole purpose seems to be to increase the prestige and salaries of management
27.
The typical “special situation” has grown out of the increasing number of acquisitions of smaller firms by large ones, as the gospel of diversification of products has been adopted by more and more managements
28.
On the contrary, managements have always insisted that they have no responsibility of any kind for what happens to the market value of their shares
29.
Good managements produce a good average market price, and bad managements produce bad market prices
30.
1 Others, known as “no-load” funds, make no such charge; the managements are content with the usual investment-counsel fees for handling the capital
31.
But “if managements talk more about the stock price than about the business,” warns Robert Torray of the Torray Fund, “we’re not interested
32.
We want to see not only whether managements are honest with shareholders but also whether they’re honest with themselves
33.
* We said in Chapter 8 that poor managements produce poor market prices
34.
Innumerable such acquisitions have been accomplished by agreement with the existing managements, or else by accumulation of shares in the market and by offers made over the head of those in control
35.
It can be stated as a rule with very few exceptions that poor managements are not changed by action of the “public stockholders,” but only by the assertion of control by an individual or compact group
36.
Those individual shareholders who have enough gumption to make their presence felt at annual meetings—generally a completely futile performance—will not need our counsel on what points to raise with the managements
37.
In the past the dividend policy was a fairly frequent subject of argument between public, or “minority,” shareholders and managements
38.
In general these shareholders wanted more liberal dividends, while the managements preferred to keep the earnings in the business “to strengthen the company
39.
It is our belief that shareholders should demand of their managements either a normal payout of earnings—on the order, say, of two-thirds—or else a clear-cut demonstration that the reinvested profits have produced a satisfactory increase in per-share earnings
40.
Acting as a majority they can hire and fire managements and bend them completely to their will
41.
19 Throughout his writings, Graham insists that corporate managements have a duty not just to make sure their stock is not undervalued, but also to make sure it never gets overvalued
42.
515), “the responsibility of managements to act in the interest of their shareholders includes the obligation to prevent—in so far as they are able—the establishment of either absurdly high or unduly low prices for their securities
43.
3) Many managements apparently were overexposed in impressionable childhood years to the story in which the imprisoned handsome prince is released from a toad's body by a kiss from a beautiful princess
44.
He does not believe in speculating that an underperforming company will be taken over, because most managements resist selling out
45.
He sees a general trend having developed over the last decade or so in which managements have become more attentive to the views of their institutional shareholders, and he no doubt played his part in that change
46.
In business you don’t want to put yourself in the position of having to manage too much—if you buy fifty companies you then have fifty managements to straighten out
47.
Nobody understand human nature as well as Bill O’Neil, in particular when it came to the managements of certain companies who can get carried away as a result of their heady success
48.
The authors’ most successful investments have revolved around being in bed with superior managements who were able to be opportunistic on a long-term basis, say five years or so, in taking advantage of the resources in the business
49.
The underlying characteristic of these superior managements, in our opinion, is that they seem to focus on the same things we focus on as buy-and-hold investors; that is, long-term wealth creation
50.
Unlike most stock market participants, the primary focus of these managements is not on what periodic reported earnings per share, or periodic EBITDA (earnings before interest, taxes, depreciation, and amortization), might be
51.
More importantly, this myopic view, turned conventional wisdom, has had a profound effect on how many aspects of business and security analysis are handled; that is, from how managements are appraised, to how accounting numbers are used, to whose needs accounting rules must address, to substantively consolidating the interests of the company and its shareholders for all purposes
52.
and other corporations create wealth, enables us to develop a much richer framework for appraising managements as wealth creators, provides us a guide for using accounting numbers for what they mean rather than what they are, facilitates the identification of communities and conflicts of interests among business constituents, and as a result allows us and those using our approach to have much better chances at achieving long-term investment success
53.
Moreover, under the influence of this view market participants tend to appraise managements only as operators
54.
Managements will tend to be judged by their ability to improve margins, increase sales, organically grow the business, reduce costs, and so on
55.
” We discuss the appraisal of managements in Chapter 11
56.
Equally surprised would be managements and long-term buy-and-hold shareholders who are pressured by OPMI shareholders who want the company to maximize short-run reported earnings per share, even when this entails forgoing attractive investments in projects with a long-term payoff or results in income tax bills that are larger than would otherwise be the case
57.
Entrenchment is normally very important for managements
58.
Managements have succeeded generally in achieving a favorable environment for management entrenchment: State antitakeover laws that insulate managements in office have become virtually universal since the 1970s
59.
Many managements want buoyant OPMI prices simply because they would rather have their stockholder constituencies happy, even though shareholder unhappiness would carry no downside risks for management
60.
Outsiders seeking control from entrenched managements usually have to incur huge up-front expenses and almost always are faced with uncertainty as to whether control will be attainable
61.
Evaluations have to look at companies and managements not only as operators of going concerns, but also as investors and financiers
62.
This tends to happen when stock traders desire to pay premiums for aggressive managements, although companies with high-quality assets oftentimes are run by careful rather than aggressive managers
63.
The toughest problem by far, is to identify managements and control groups of these net nets who are both able and conscious of the interests of outside, passive, minority investors
64.
We believe that in almost all analysis outside of the day-to-day stock-trading environment, NAV is a highly useful tool of analysis for a variety of purposes, including as a comprehensive measure of the wealth-creation capability of a business, as an appraisal of companies and managements as operators, investors, and financiers and as one measure of the resources and liquidity available to a business
65.
In fundamental finance we view capital structure as something that arises out of a process that involves meeting the needs and desires of a multiplicity of constituencies, including various creditors, regulators, rating agencies, managements and other control groups, outside passive minority investors (OPMIs), and the company itself
66.
(These characteristics are not exclusive to OPMI shareholders; they are shared with creditors, regulators, rating agencies, managements, and control shareholders
67.
Once it is observed that managements and control groups have multiple agendas that combine communities of interest and conflicts of interest with various of their constituencies, disparate factors affect managements’ and control groups’ influence on what an appropriate capitalization will be
68.
Few managements are likely to conclude that the appropriate capitalization is that structure which will maximize the trading price of the OPMI common stock
69.
OPMIs pretty much have to leave companies as-is, and therefore place particular efforts into buying into well-managed businesses with stable, but clearly superior, managements
70.
Second, whether or not they have opportunities for profitable investment of the funds is not something that is going to be told to companies or their managements by the stock market appraisal of how their earnings are capitalized
71.
As a practical matter, buy-ins are likely to remain a limited activity simply because for most corporations, no matter how attractively priced their managements think their stock is, share repurchases are impractical—the company lacks either the liquidity or the legal authority to repurchase or retire shares
72.
There does not appear to be any basis in fact for assuming either that managements act in the best interests of stockholders or that stockholders have an absolute community of interests among themselves
73.
The simple fact is that relationships among managements and stockholders of public companies are always combinations of communities of interest and conflicts of interest
74.
The Modigliani and Miller view of the fiduciary management selflessly toiling for the ideal stockholder simply does not accurately describe how all managements of public companies think and operate
75.
That managements do not tend to work primarily in the best interests of all stockholders has been pointed out by John K
76.
The outside groups that managements of publicly owned corporations tend to view impersonally are the outside passive minority investors (OPMIs) and the Internal Revenue Service, among other tax-collection agencies
77.
Since managements have virtually no community of interests with tax collectors, there is no tendency to guard the interests of this group, except as required by law and in reaction to threats of audit or other investigatory activity
78.
Most managements do not view outside stockholders either as allies or as adversaries
79.
And there are times when managements want what most outside stockholders want—for example, a high price for the company’s common stock
80.
Probably the best indications that managements do not, on the most practical level, work in the best interests of stockholders can be found in the need for an elaborate legal structure to protect outside stockholders from predatory practices by insiders
81.
Left without these legal constraints, we have little doubt that many managements would be far less cognizant of the stockholder’s best interests than is now the case
82.
The appraisal of managements is, indeed, difficult
83.
In a Graham and Dodd primacy of the income account approach (or any other primacy of the income account approach) managements are appraised almost solely as operators of strict going concerns
84.
Superior managements seem to focus on the same things a value investor focuses on as a buy and hold investor, that is, long-term wealth creation
85.
Unlike most stock market participants, the primary focus of these managements is not on what periodic reported earnings per share, or periodic earnings before interest, taxes, depreciation and amortization (EBITDA), might be
86.
Once it is recognized that superior managements seek long-term wealth creation, and that their businesses generate wealth by being engaged in both going concern and resource conversion activities, it follows that managements should be appraised based on three interrelated dimensions:
87.
We want the managements of the companies in which we would invest to be attuned to the interests of outside passive minority investors (OPMIs); to be competent as day-to-day business operators; and to be competent as wealth creators as resource conversion opportunities emerge opportunistically from time to time
88.
Experience tells us that we have achieved the best results when associated with superior managements who were able to be opportunistic on a long-term basis, and took advantage of the resources in the business, which included:
89.
Rather, all financial relationships, including those between managements and OPMIs, combine communities of interest and conflicts of interest
90.
The best OPMIs can hope for is that there is a distinct bent by individual managements toward the communities of interest side
91.
Managements can and do create wealth by acting as opportunistic investors
92.
It seems to us, though, that much of security analysis and much of accounting is directed toward appraising businesses and their managements solely as operations and operators
93.
The factors that allow the managements to be opportunistic also bring to light certain shortcomings, at least from the viewpoint of shorter-term stock market speculators
94.
Given this, the managements tend to be nonpromotional, and at times, hardly interested at all in what Wall Street thinks
95.
For better or worse, we would opt for managements more interested in creditworthiness than enhanced ROE
96.
On the opportunism issue, we are convinced it is very difficult for most managements to be opportunistic if their financial positions are such that they have to be supplicants to creditors—whether those creditors are financial institutions, trade vendors, or landlords
97.
As we explain in Chapter 7, a strong financial position—that is, being creditworthy—gives managements options they would not have otherwise
98.
It is just too difficult to properly put into forecasts factors such as competitive forces, technological innovations, inexperienced managements, business cycles, access to capital markets and acts of God
99.
The view of businesses as pure going concerns has led to appraising managements only as operators