One timeless advice I received & tried to use in last 7 years w.r.t investing in stocks is "Investing in management yields much better returns than business or industry". Some examples indicating how important it is .
1) If Company is offering interim dividend mid-year but reporting loss for Financial Year , then it is just a means to cash out money from company for Promoters.
2) Besides FMCG, Financial Services & IT industry, except exceptions, it is really difficult to get Net Margins % in range of 15-25 % leading to limited cash supply at most companies, so if company is paying really high dividends without exceptional performance, it is just means to serve few selected & significant shareholders like promoters & FIs.
3) Shareholding pattern at Best Performing Companies :
Promoters > Foreign Investors (FI) > Mutual Funds (MF)> Retail Investors.
If share of retail investors is high & FI & MF are absent, it means management is not under pressure for excellence in operational performance & reporting & share is pure recipe for Trading.
4) Companies with Promoters & retail investors as shareholders only (absence of FI & MF) generally report their quarterly/ annually results about one month late than their peers as they don't have investor pressure for results, so half of the reported data is already outdated.
#investing #thoughtfortheday
