Investing in RI companies

In the past few months many investors have complained about the lack of protection from capital market authorities, via radio, TV shows, etc., when the company they had shares in were delisted.

However, I would like to suggest that investors do not totally depend on others to protect their investments. Even in the mature U.S. stock exchanges, there are stories of companies going bust, leaving investors with worthless stock. Thus I feel that investors should not put all the blame on others. For example, in the well-known Fiskaragung case, how many investors even bothered to monitor the company's development?

In fact, a few months before it went belly up, in the financial report section of the JSX website it clearly showed that the company's profit from operations alone was already negative. While the financial reports of public companies here cannot be relied upon to be 100 percent accurate (as Kwik Kian Gie wrote in his several books about the financial engineering done by some of our big public companies), at least some signs can be detected that big trouble is coming.

To prevent such losses and to improve results, I would like to suggest the following: * Never invest in corporations whose management have a past bad reputation for being involved in corruption, collusion and nepotism and/or devious practices like executing internal acquisitions. * Avoid companies with high debts. It should not surprise anyone who bothers to do some research that some of the recently delisted companies belong to a conglomerate with a lot of debt, or has a dubious reputation.

Many will agree that some of our "bad" conglomerates are so greedy that they will not stop their antics unless maybe they feel they are richer than Bill Gates. But note that Bill Gates, Warren Buffett and the other true captains of industry achieve very high net-worths via good corporate governance, retaining their companies' earnings and compounding them at high rates of growth. Investors who stay with high quality people like them do well.

On the other hand, some of our bad conglomerates who use various maneuvers to enrich their own pockets and cheat public shareholders are like pirates who steal gold and bury it in pirate caves. Yet many people still buy their shares. If the public still invests in bandits and do not do well, don't blame others. As they say "Let the buyer beware!"

SURIANTO ROCHILI

Jakarta