RE:RE:What is Gamehost’s Future? You decide!Hi Cpeczek,
Finding the right person to manage the portfolio (really just making the buy decisions as it would be strongly recommended to just hold the individual stocks for a really long time to let the compounding take effect and defer taxes) is crucial.
The Company would have to conduct interviews with potential capital allocators to find out how they go about finding the right investments and what their thought process is: what they bought, when they bought it, why did they buy it, what did they focus on specifically in that company, how they derived at what price to pay, etc. (and bring proof of these investment decisions – statements showing when bought and either still holding or when sold and why)
While you want a successful capital allocator – one that can and has beaten the market over long periods of time - he/she has to be right for the right reasons. You see, it is more important to see how a person arrived at making an investment decision than the actual outcome itself. Many people are right for the wrong reasons. You need a capital allocator who is right for the right reasons.
Intelligence, logic, analytical competence, and emotional control are more important than luck and will win out in the end – a higher long-term compounded rate of return. A bad investor is like a person who plays the slot machines. You may be lucky and win in the short-term but the longer you play the more it is evident that the capital allocator does not possess the above desired characteristics and the result will be inferior. This is how Buffett conducted his search for a capital allocator to succeed him, and found Todd Coombs and Ted Weschler.
As for your second question, if management were to go along with this – highly unlikely in my view – they would be making a commitment to grow this Company for the very long-term and that the end game would not be to sell the Company. If GH were successful in this growth, it would attract a lot more investors and its stock price would finally actually increase – for a change – with a good future ahead of itself. Management who wanted to exit some of their position could sell into the market at that point in a new found pool of liquidity.
However, all of the above is academic as I believe that the probability of GH continuing on its present course is almost a certainty - but you never know. My post was just to show the possible outcomes for GH. Some would end much better for shareholders than others. Each shareholder can decided for himself/herself what they desire.