Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 224

What we look for on company site visits

Research procedures combine both qualitative and quantitative processes and the company site visit is particularly important as part of the qualitative assessment. A picture can tell a thousand words and a site visit can be much more effective than watching a company presentation.

A company site visit can reveal much more

Here are a few of the things we look for during a company site visit:

1. Describe the business in one sentence

We adopt the old adage that if we can’t explain an investment in a sentence then it is not for us. Site visits should be a valuable way to understand a company’s operations and gauge the current business environment.

It’s crucial when speaking with our investors to explain exactly what we are investing in, particularly given our investee companies tend to be lesser known by the broader community. If we spend a day with a company and walk away without a clear understanding of their operations, it is generally thrown in the ‘too hard basket’.

I recall an investor day where we discovered the company had built up numerous divisions across competing product offerings.  What had started out as a simple business was now a complex conglomerate. Following a number of ad hoc acquisitions, they had created a completely different culture. It became a confused message from the company with too many people talking about different areas of operations. Since our visit, this particular company is looking to restructure and has been discredited by the market.

2. Look for activity

Looking for the ‘pulse’ of an operation is essential regardless of whether we are visiting an office, a factory or construction site. We focus more on what we see as the business grinds away rather than what we are told. Are all the sales staff busy? Are there a lot of empty seats? Is the machinery working? Are the shelves full? Are there a lot of trucks driving in and out? These could be key factors underpinning the company earnings 12 months down the track.

We have counted the number of times an activity occurred to do the rough maths on whether the company is delivering on its market outlook. More obvious signs are delays resulting in the slowing of the sales process, for example, visiting a logistics company headquarters where there is a complete lack of activity or empty trucks being deployed.

At a recent agricultural site visit, we could see that a company’s operations were working efficiently. Commodity throughput was strong, the team members were working well together and a steady stream of semi-trailers were moving in and out. The site visit played a part in forming our investment thesis and we became shareholders.

3. Understanding company morale

Typically, site visits are conducted by company CEOs to show investors their operations. Something you will not get a feel for in a boardroom meeting is how employees behave towards the CEO. It can be more of an art than a science, but it is always a great sign when the CEO knows everybody’s name and shows and receives respect from other staff members. Body language can be a telling factor. If we notice anything which makes us question the ability of a CEO to generate a successful culture, we will reconsider our investment decision.

We place a strong emphasis on management quality. During a visit to an interstate company site, it was obvious the CEO did not have the respect of his colleagues. We flew home, reassessed our investment and sold out. On the flip side, we visited a retirement living home where the CEO knew the residents and was happy to talk to Mrs Jones or Mr Smith about what they were having for lunch and how their grandkids were going. This company has grown its share price by more than five times over the past five years.

4. Detecting a gravy train

In listed companies, management’s key role is to act in the best interest of shareholders so it is crucial management act responsibly with the capital entrusted to them. It is easy to disguise spending in the income statement reported to the market. We look out for things like the types of cars in the carpark or we sneak a peek at the CEOs office. Excessive spending will influence our view of the company.

An example was an unprofitable local micro-cap which had an extravagantly-sized office and boardroom filled with expensive furniture when the company came close to bankruptcy shortly after our site visit.

Site visits are an essential aspect of our investment process which endeavours to find quality companies to be held for the long term.

 

Robert Miller is a Portfolio Manager at NAOS Asset Management. NAOS Asset Management is a boutique funds management business providing exposure to emerging and small-mid cap industrial companies. This content has been prepared without taking account of the objectives, financial situation or needs of any individual.

RELATED ARTICLES

Five actions to watch in management share buying

Why bother with company visits?

Lessons for all directors from Senator Sinodinos’s grilling

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Latest Updates

Investment strategies

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Planning

Super, death and taxes – time to rethink your estate plans?

The $3 million super tax has many rethinking their super strategies, especially issues of wealth transfer on death. This reviews the taxes on super benefits and offers investment alternatives.

Taxation

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Shares

The megatrend you simply cannot ignore

Markets are reassessing the impact of AI, with initial euphoria giving way to growing scepticism. This shift is evident in the performance of ASX-listed AI beneficiaries, creating potential opportunities.

Gold

Is this the real reason for gold's surge past $3,000?

Concerns over the US fiscal position seem to have overtaken geopolitics and interest rates as the biggest tailwind for gold prices. Even if a debt crisis doesn't seem likely, there could be more support on the way.

Exchange traded products

Is now the time to invest in small caps?

With further RBA rate cuts forecast this year, small caps may be key beneficiaries. There are quality small cap LICs and LITs trading at discounts to net assets, offering opportunities for astute investors.

Strategy

Welcome to the grey war

Forget speculation about a future US-China conflict - it's already happening. Through cyberwarfare and propaganda, China is waging a grey war designed to weaken democracies without firing a single shot.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.