My investment philosophy

 

Investment = Management

I can explain my philosophy of investment by one equation 'Investment = Management'.

The best managers soon become the best investors. The best investors are those who recognize the best management. It is important to remember that the relationship between the two is only a partner and complementary relationship for improving and expanding the productivity of the enterprise.

Behind stocks are companies, and behind financial statements are business models. How well a company uses its business model depends on the capabilities of its management. Both business model and management abilities drive corporate performance.

Business model has the characteristics of each industry in which a company operates, and if a company operates multiple businesses, its model varies depending on how assets are allocated to each business. This is mainly the job of the CFO. However, good managers are good at allocating assets. As you expand your business, it makes sense to reinvest a highly productive business. It is pouring water into the bottomless jar that keeps financing low-productivity businesses to revive businesses that are entering the declining industry. Managers should be most alert to this when allocating assets.

In terms of industry-specific characteristics, the first thing investors should consider is whether the industry has essential demand and whether it is sustainable. There is an essential demand in people's daily life, there is an essential demand in the operation of a company, and there is an essential demand in the existence of a country. Find the essential demands of each economic entity, determine whether it is sustainable, and find a company with the highest market share and competitiveness among the companies doing the business. After that, you can check whether the management of the company prioritizes shareholder value.

It is undesirable if executives' salaries are measured high even though corporate performance has deteriorated. As long as the management is not a person with expertise in the business, but is simply hired to fill the number of executives in another business field, it is also an investor that an incompetent manager receives a high salary as an employee who does nothing and only receives a salary from the position of the CEO. It is the same from the standpoint of. In addition, even if a person with expertise in the business becomes an executive, there is room for a fatal mistake in management because he has never dealt with the critical issue of asset allocation. A company that has a separate CFO for the company may relieve that concern, but this requires investors to have a good management-like view of the business.