The strong or weak abilities of management are already on display in the past performance of a business, which is what sets the baseline for a forecast. It is therefore already included in your valuation. If you are tempted to consider the abilities of management in your risk calculation, perhaps through increasing or decreasing your discount rate, you are in fact double counting it, which will probably lead to over or under valuations of the business. In other words, a premium or discount should not be added to the fair-value multiple of a stock. Instead, allow the quality of management to guide your conviction, sizing, and your forecasts.
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In Risky Markets, Leaders Provide The Best Risk-Adjusted Returns
Link Explanation: The linked note above suggests that when a market is risky and turbulent, sticking with the leaders reduces your risk since they already have established supply chains, customer relationships, etc. What it doesn’t mention, is that they also likely have the best management teams, which is inherently why they are the biggest - they have a team that is able to get the most out of the endowed resources, culture and technology available to the firm.