Investors need to consider the impact of a business’ leadership team on its stock’s performance before investing, according to Quay Global Investors.
The company said the chief executive of any business will be a “key determinant of its success” even when other metrics are supportive.
“Undertaking in-depth research and due diligence is vital to successful investing, but there are always unknowns that create risk for investors,” said Quay Global investors chief executive Chris Bedingfield.
“The sector outlook, market environment or demographics can make a company seem a very attractive investment proposition, but the CEO can make all the difference to its ultimate success or failure.”
Mr Bedingfield said investors should examine a CEO’s track record, understanding of risk, response to challenges, and overall leadership ability before investing in a company.
“It is particularly useful to look at changes in performance in the context of the market and economic environment,” he added.
“For instance, if out-performance has continued in both strong and weak markets, this is a very positive signal.”
Mr Bedingfield said researching a company’s chief executive should be an imperative for investors.
“Making a judgement on a CEO’s track record, understanding of risk, response to challenges and leadership ability provides an insight into future performance, and should be an important consideration for all investors,” he said.