Big investors like Warren Buffett have the clout, time, and resources to evaluate a potential investment's management face to face. You may not have quite such a mighty address book, but that shouldn't stop you from assessing the people in the executive suites.

When sizing up management's mettle, I always start with two simple measures: ownership and returns on invested capital. I want to know whether management has skin in the game, aligning its interests with mine. And I want to learn how well executives have allocated shareholders' hard-earned capital. If management owns a significant stake in the company, and can generate value-creating returns on invested capital, I call that a win-win!

Recently, Best Buy (NYSE: BBY) and its management team caught my eye. The table below will tell you why:


Insider Ownership


Best Buy



Conn's (Nasdaq: CONN)



Sears Holdings (Nasdaq: SHLD)



Source: Capital IQ, a division of Standard & Poor's, and author calculations.

Insiders own 17% of the shares outstanding, and returns on invested capital have consistently exceeded 15%. Since the cost of capital for most companies is between 8% and 12%, depending on their capital structure, Best Buy is creating value for its shareholders.

Studies also show that competition erodes returns over time. Yet Best Buy has generated those impressive returns while vying with Conn's and Sears. That impressive achievement suggests that management knows what it's doing.

Good execs? Check!
From the data above, it certainly looks like Best Buy's management has been creating value for its shareholders. Given its top-notch leadership, I'd suggest you give Best Buy a spot on your watch list.

Million Dollar Portfolio associate advisor David Meier does not own shares of any of the companies mentioned. Best Buy is a Motley Fool Inside Value pick and a Stock Advisor recommendation. Motley Fool Options has recommended a bull call spread position on Best Buy and the Fool owns shares of it. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.