Firstly, I must clarify that the China based listed companies that I sold were: XDL, MSPORT, and MAXWELL that are still listed in Bursa Malaysia. I shared some of my insight about these companies few years ago. They are still fundamentally attractive, I must admit it. However, some questions that appear in my mind cannot be answered satisfactorily. Thus, I decided to clear them out from my portfolio with margin loses.
The very first question is: If you got many extra cash, do you put all your cash in bank account or fixed deposit account for years?
Money management: Fixed Deposit Versus Simple Bank AccountI believe a successful business person should always optimise his or her limited resources, especially cash. Putting abundant of cash in bank account instead of Fixed deposit for years is definitely unacceptable for me. Both accounts have the same level of risk, say bankruptcy? I believe that even a simple educated person sure will put his or her extra money in Fixed deposit (instead of bank account) for years. It is a very simple action to at least earn some interest for almost risk-free.
No dividend, againMoreover, with so many extra cash, these directors appear no willing to share their profits with their shareholders. For a company that earned 20sen yearly, 2sen dividend appears just a very affordable task. Personally, if directors are ONLY willing to share their RISK with shareholders, then it is no point for me to invest my precious time and money on their companies.
Shareholders' interestAlthough I may not a very patient investor to hold the shares of a companies for years with nothing tangible return like dividend, it is still acceptable for me to hold companies' shares for nothing, if and only if, I can 'feel' the management or directors of that companies are willing to take care the interest of their shareholders.
There are many ways to take care the interest of their shareholders. The core idea is to optimise the value of each shareholder. It is totally understandable that companies need to reserve certain amount of cash for any potential impact or unexpected events in the future. But I do not believe that holding abundant of cash in Bank Account is a way to optimise the value of shareholders. This suggests that the management or directors are lack of money management skills.
This post excludes the potential of "Cooking the Book". This is because it requires more information to discuss this matter. Nonetheless, my logical thinking and observation based on the few questions above suggest me to get rid of these companies as soon as I can.
Please do not sell them if you have good answers or explanations upon my silly questions and concerns above. That's all for today. More fascinating articles and sharing will be updated from time to time in Xaivier Blog. So, you are welcome to subscribe our feed, look at our sitemap or simply visit our Homepage for latest sharing.
Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.