Investing in RI companies
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