There's no question that executives have had their hands full navigating the rocky economic environment of the past year. Although we at Morningstar prefer a quality business over topnotch management--as it is much easier for a company to change management teams than industries--recent events have brought home the point that management decisions can have a dramatic effect on a company's fate.
Some executives' boneheaded moves have been thrown into the spotlight as yesterday's red flags have turned into today's red ink. While criticism is both easy and fun, to paraphrase Homer Simpson, hammering overpaid and underperforming executives is a little too easy these days. Instead, in this article, we'd like to focus on the good moves that management teams have made and some lessons that can be drawn.
On Nov. 6, executives from 18 of our favorite companies will be presenting at our annual stock conference (click here to see the list of companies presenting and click here to register for the forum). Within this group of presenters are two former Morningstar CEOs of the Year, Will Oberton of Fastenal (FAST) and Robert Silberman of Strayer Education (STRA). We can't think of a better sample set to mine for canny and instructive management decisions.
Hope for the Best, Prepare for the Worst
When we look at the companies that have outperformed during these times of stress, it is not so much what they have done recently that has mattered, but how they behaved when times were flush. REITs have had a particularly hard time lately, as their leveraged balance sheets and exposure to the real estate market acted as a double whammy. One of our favorite REITs, Realty Income (O), while not completely immune to the crisis, has fared much better than most. More than two years ago, Realty pulled back from major property acquisitions, content to wait for a more attractive buying market.
