Bad Management

Bad management can make a good business look lousy, and corrupt management can make a terrible business look great, which is even worse.

The issue is particularly important for value investors. We try to pick up companies that are trading at low prices because they're out of favor with the Wall Street crowd. But often, companies are unpopular because they're known to have less-than-stellar management. So it's critical for value investors to be able to identify bad leadership to avoid companies that are cheap because they just aren't all that valuable.

Richard Gibbons presents six warning signs to help identify such companies.