As an investor, analysing and buying a share to add to your portfolio involves identifying a stock which meets numerous criteria set by you.
These criteria can range from balance sheet strength, to dividend payout expectations, to industry exposure – just to name a few. Another important criteria but one which is sometimes glossed over is the quality and capabilities of a company's managers.
Good managers are of course vitally important, as their decisions ultimately affect the direction a business takes, which in turn will affect the returns achieved.
When it comes to identifying high-quality management there are a few rules of thumb which won't guarantee success, but they will often provide a fertile search area. These rules of thumb include identifying founders running their own business, managers who have invested significant 'skin in the game' in terms of their percentage of wealth, and managers who have demonstrated an ability to add value for shareholders.
One manager who knows how to successfully build and run a business is billionaire, Kerry Stokes, the Executive Chairman of Seven Group Holdings Ltd (ASX: SVW).
While the recent performance of Seven Group hasn't been stellar due to the group's operations facing a double whammy of a struggling media market and a struggling mining services industry. This via its holdings in Seven West Media Ltd (ASX: SWM) and Caterpillar heavy earth moving equipment franchises.
Like its peers Ten Network Holdings Limited (ASX: TEN) and Bradken Limited (ASX: BKN), Seven Group has been caught in the 'perfect storm'. According to data provided by Morningstar however, FY 2014 may see the bottom in earnings, with earnings per share forecast to increase from 71.1 cents per share (cps) to 74.5 cps in FY 2015. With the company forecast to maintain its dividend at 40 cps in FY 2015, the stock looks attractively priced, trading on an undemanding price-to-earnings ratio of 10.2 and fully franked dividend yield of 5.3%.
