Dear Mr. Tan
It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples:
1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear.
2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company.
3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period.
4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars.
Pang
Most of the people I know who buy shares just buy based on numbers. "If the number is down, that means it will go up in the future" is the general investing tip.
ReplyDeleteI've never heard anyone talking about the company's strategy for the future.
Looking at numbers is just one side to investing. Looking at people is the other.
Pang
ReplyDeleteAll the points you raised shld be checked by potential investor before buying a counter.
If he doesn't, then eng eh tai chee.
A fool and his money are soon parted.