Good management is equally as important as a good product, maybe even more important. Contrary to what people think that a good product sells itself irrespective of the management, a bad management can turn a company with a good product into bankruptcy. The golden example of this rule is Krispy Kreme. This company probably makes the best doughnuts out there, but bad management has led this company to the brink of bankruptcy.
Another example of this rule is a company I invested early on called DHB Industries. This company made protective vests for army and police departments throughout the country. And various studies had showed that the product of this company was superior to its competitor. Unfortunately for the shareholders of this company, the owner/chairman/CEO was not exactly shareholder friendly. In a matter of 10-12 months, he did everything possible to erode the companies value while paying himself. In 2005 alone, he paid himself close to $100 million, threw a huge birthday party with company money (rumored to have cost $70 million), awarded himself more options vesting at below $1 when the share was dropping in value every day. Within 8 months of me purchasing this stock, its share price dropped from $12 all the way to $3. It continued to go lower, and was delisted from the NYSE and currently trades in pink slip. I even made the mistake of doubling down on this stock as it kept losing value.
Moral of the story, do not invest in company who's management's interest is not aligned with the shareholders. This most definitely results in the company value eroding. If you do want to make money off of this situation, SHORT the stock.
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