Originally published July 2021.
The biggest risk a business faces is having bad management. That’s according to Warren Buffett in his latest shareholder meeting.
I agree. Assessing company management is one of the most important jobs an investor faces, but it’s far from easy and is more an art than a science.
Buffett’s business partner, Charlie Munger, famously says, “All I want to know is where I’m going to die, so I’ll never go there”. I tend to approach the challenge of assessing company management in a similar way.
Below, I outline (in no particular order) a series of red flags that serve as warning signals for me. Some of these are very common and won’t necessarily put me off from investing in a company, but a combination would be a potential cause for concern.