Whether a company can achieve its sales and earnings objectives
depends in part on how it competes within its industry. Industry
sales and earnings may be growing, but if the company is not competitive
enough, it may not capture a large enough portion of the
increasing sales in the industry.
How a company competes in an industry depends on many
* The resources the company has in relation to its competitors
* The company’s range of products versus its competitors’
* The level of success of the company’s existing range of
* The company’s level of innovation in its introduction of
* The company’s ability to diversify into new markets
* The strength of the company’s competitors
You should consider these factors when determining the relative
strength of a company in an industry.
Quality of Management
Another factor to consider is the quality of management. Access to
a company’s management is often difficult for financial analysts
and virtually impossible for the general investing public. The most
you can do to determine the quality of management is to look at the
company’s history and read financial newspapers for stories about
management. For example, a high turnover rate for top and middle
management indicates that all is not well. A company with an
effective management generally is assumed to be more successful
in meeting its sales and earnings objectives than a poorly managed
ExxonMobil, for example, managed to consistently increase its
earnings, even during periods of declining oil prices. In addition,
ExxonMobil faced a negative climate in the early 1990s owing to the
Exxon Valdez oil spill. ExxonMobil’s management was not deterred
and stuck to its original investment objectives, which were projects
with high returns. This strategy supported the company’s profits, in
contrast to the frivolous investments made by many of the other oil
companies during the same period.
How chief executive officers (CEOs) are paid in relation to the
company’s stock performance tells much about management. The
stock price of Cisco Systems declined by 31 percent in 2002, but
the CEO’s compensation declined by 67 percent in that same year.
These circumstances were certainly not the same at many other
companies, such as K-mart, JDS Uniphase, Quest, and WorldCom.
When their stock prices declined significantly, the CEOs and members
of top management rewarded themselves with additional
salaries and bonuses.
The Internet has made gaining access to information about companies
and management a little easier for individual investors. If you
want more information, the first stop is the company’s home page on
the Web. At the ExxonMobil Web site (www.exxonmobil.com), for
example, you can read about the company’s sales strategies and how
it is positioning itself for the future. Investors also can read the company’s
annual and quarterly reports. Read the “Management
Discussion” section to assess any future trends or investments.
You also can e-mail questions to the investor relations’ staff of
companies in which you are interested. The speed and quality of their
replies will tell much about how management views its shareholders.
Categories in Trading Mistakes
Lack of Trading Plan
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Using too much Leverage
Determining the proper capital requirements for trading is a difficult task
Failure to control Risk
Refusing to employ effective risk control measures can ensure your long-term failure
Lack of Discipline
A lack of discipline can destroy even the most talented and best prepared trader
Useful Advices to Beginning Trader
You can control your success or failure
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