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, Urban Outfitters (Nasdaq: URBN) and its management team caught my eye. The table below will tell you why:

Company

Insider Ownership

ROIC

Urban Outfitters

21.8%

20.7%

bebe stores (Nasdaq: BEBE)

63.7%

3.9%

Dillard's (NYSE: DDS)

6.3%

3.7%

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

Insiders own 22% 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, Urban Outfitters is creating value for its shareholders.

Studies also show that competition erodes returns over time. Yet Urban Outfitters has generated those impressive returns while vying with bebe stores and Dillard's. That impressive achievement suggests that management knows what it's doing.

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

Million Dollar Portfolio associate advisor David Meier does not own shares of any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.