FY17 Result, page-31

If all things were equal, other than the motivations and circumstances that drive the helmsmen, prudence suggests that you look to the personalities of the helmsmen. For all companies, the short term can be made to look good at the expense of the longer term, and for debt-collection firms, this is easily effected by valuations of the purchased debt, which sets the PDL amortisation rate.

Consider three debt-collection companies, X, Y and Z.

X is managed by Hank, who owns a pile of shares, he has a generous performance bonus, and after spending years in Australia, he yearns to retire to his native USA with a pile of money. Hank might be tempted to maximise his short-term bonus scheme, and also pump up the SP and sell out on good performance news.

Y is managed by Flash, who has owned and sold, or part sold a few companies. One variation of part selling is floating a stock and later capital raising. If Flash has a mind to either sell out again, or raise more capital, he too might be tempted to optimise the short term.

Z is managed by Thomas. Thomas is a peculiar sort of man to be CEO of a listed company – he regards it as his duty to run the company he manages well in the long term, and he lets the SP find its own level in the fullness of time. Thomas hates adrenaline rushes, so he does not take unnecessary risks. He also dislikes not meeting targets, so he always sets them so that he can eclipse them (a foible that I am happy to forgive). Thomas believes in organic growth, so he avoids capital raisings to fund expansion, and hence there is no need for him to indulge in corporate window dressing (inflated EPS, ROE and other easily manipulated short-term metrics) to appeal to investors.

If you have to invest in any one of these companies, and Z does not have a ridiculous price premium, then run with Z. If I had more time, I would have looked into the actual executive incentives that apply to CCP relative to its peers.