History and top-line investing tips

I was at a dinner the other night and the after dinner speaker, a prominent investor, shared some of his views on value investing. It was as much a lesson in history as an after dinner masterclass.

When looking to invest in a company consider the following:

Turnover is the single most important factor in a company’s accounts. The top line, is the one true measure of a company’s potential. All the rest, he said smirking, can be massaged.

The sales force is the company’s most important asset. More than any other division, it is the one that will grow the company. That is why the City is so successful, it has the best sales force in the world in its investment bankers.

Get to know the CEO. Study his or her history, in the current company and previously. Look at everything, not just their actions and decisions but also accounts. Speak to anyone you know who might have had any dealings with them. In his experience, a CEO that can both develop a business plan and implement it is a rare find.

Similarly, when it comes to M&A, there is usually one person who will decide the fate of the acquisition. It could be a CEO, a regulator or a judge. Work out who that person is and study them as you would a historical figure; understand how they think. That could give you the vital clue to how they will act.

It was a stimulating cocktail of history, investing and, of course, wine.


About Gideon Benari
Solvency II Wire a site dedicated to informing professionals in financial services industry about Solvency II, the new regulation for the European insurance industry.

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