CEO promises and long term plans for investors by Eugene Alexeev
Why CEO promises matter for the company's future – and for investors
Hey there, friend!
Today, we’re diving into the heart of CEO promises and long-term plans – the stuff that gets true value investors excited. Why?
Because these are the areas where the philosophies of Buffett, Munger, Pabrai, and Spier shine, helping us spot the companies that aren’t just chasing short-term numbers but are focused on building real, lasting value. Let’s get started!
The Role of CEO Promises in Value Investing
When CEOs talk about sustainable growth, they’re showing us a roadmap of what their company aims to become.
For us value investors, these promises are clues, telling us whether a company is worth our attention. As Warren Buffett puts it, "It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
So what are we looking for? Let’s break it down with insights from the value investing greats:
Long-Term Vision - CEOs who have their eyes set on the long game are the ones we value investors admire.
They’re not swayed by quarterly reports; instead, they’re thinking years, even decades, ahead. Buffett has always focused on this, choosing businesses that show durable competitive advantages and that reinvest in growth over time.
Solid Management - Mohnish Pabrai, known for his “copycat” investment style, emphasizes that the right management team is essential.
CEOs and management teams who know how to lead through both good and challenging times are invaluable.
Pabrai himself often quotes Buffett’s friend and partner, Charlie Munger, who once said, “Smart people are everywhere; disciplined people are rare.”
Clear Risk Strategy - Risks are part of the game, but the real winners are the ones who see risks coming and plan accordingly.
Munger would probably add a humorous warning here: “If you’re not looking out for pitfalls, they’ll find you.”
As value investors, we want CEOs who acknowledge and manage these risks with a calm, steady hand.
The Art of Transparent Communication
Clear communication from a CEO isn’t just about throwing around buzzwords or boasting about success. Value investors like Guy Spier, who paid to dine with Buffett for firsthand insights, know the importance of CEOs who speak honestly. Spier values CEOs who share both achievements and failures openly, building trust with shareholders.
Here’s what transparent CEOs bring to the table:
Regular, Honest Updates - No sunshine and rainbows here; real value creators offer the full story. CEOs who communicate their goals, risks, and challenges foster an environment where investors can see the big picture.
This McKinsey’s report shows that companies with transparent, regular updates are more likely to attract loyal, long-term investors.
Stakeholder Focus - Long-term companies know their success isn’t just about shareholders; they’re also thinking about employees, customers, and communities. (more about it in this report) reveals that companies that consider stakeholders tend to perform better. It’s not just a PR move; it’s part of creating sustainable, all-around value.
Behaviors That Drive Sustainable Value Creation
What do value investors love in a CEO? The ability to follow through with strong, consistent strategies. Here are three key behaviors we look for in long-term value creators:
Investing in Strategic Priorities
Long-term companies put serious capital into what counts: R&D, top talent, and growth initiatives.
For instance, Microsoft’s early bet on cloud computing, despite its risks, is now paying off as the company commands a significant market share.
As McKinsey points out, long-term investments often correlate with higher revenue growth and greater shareholder returns.
Dynamic Capital Allocation
CEOs who aren’t afraid to reallocate resources are more likely to generate steady returns.
Walmart’s omnichannel strategy is a great example; they doubled down on tech and logistics, turning the initial investment into long-term growth.
Companies that keep capital moving where it’s needed – whether that means acquiring new assets or exiting old ones – are those that create lasting value.
Prioritizing All Stakeholders
Companies focused not only on profit but on their employees, customers, and communities often end up more resilient.
Guy Spier has emphasized this point, highlighting companies where leaders recognize the long-term benefits of happy employees, loyal customers, and a healthy environment.
CECP’s findings on stakeholder value indicate that companies prioritizing stakeholders often enjoy better overall performance.
Learning from Value Investing Masters
For some extra inspiration, let’s look at a few favorite principles from our value investing heroes:
Warren Buffett - Buffett teaches us to look for companies with a “moat” – a competitive edge that protects their market share over the years.
When evaluating a CEO’s promises, ask yourself: does this plan make their moat wider? If yes, it’s a promising sign.
Charlie Munger - Known for his sharp insights, Munger warns against the temptation to follow market trends without a solid business rationale.
His advice? Look for CEOs who are “rational, not fashionable.”
Mohnish Pabrai - Famous for his high-conviction bets, Pabrai reminds us to invest like it’s all or nothing.
He once said, “Heads I win, tails I don’t lose much.” CEOs who think in terms of “big bets” with limited downside risk are the ones worth watching.
Guy Spier - A fan of Buffett’s approach, Spier looks for ethical, transparent management.
He values CEOs who talk straight and avoid corporate jargon, a rare but crucial trait.
Wrapping Up: CEO Promises Are More Than Just Words
In the end, CEO promises are about more than just hype. They’re indicators of a company’s future, telling us whether they’re in it for the short game or building something with staying power.
As always, remember that value investing is about looking beyond the surface – real, sustainable value takes time, consistency, and a focus on fundamentals.
Thanks for sticking around for this one! Until next time, keep learning, stay curious, and don’t hesitate to dig deeper into the businesses that catch your eye. See you in the next letter!
•All information in the article is sharing my own experience and is not a financial advice. It is only for educational and entertaining purposes.