I did not find any thread regarding this , so I have created this one. Purpose of creating this thread is to find out and avoid the companies which may have corporate governance issue and bad management. I know that we cant not be 100% sure but at least looking for red flags can help us in reducing our losses.
I started my investment in stock market from 2012 as a beginner with no knowledge of stock market ( with hopes of becoming another warren buffet)…lol… after reading few books on warren buffet.
I started learning and in last 7 years I have observed that most of the money which I lost in market were the companies having some kind of corporate governance issues or management was not trustworthy. Luckily , due to diversification I did not went bankrupt , but still loss is a loss. I lost my capital in below companies ( this is what I remember , could be few more).
- Tree house
- PC Jwellars
- Yes Bank
- 8 K miles
- Meghmani organics
- Suder garments
- Manpasand Beverages
I would like people to share there views on how can we avoid such blunders or reduce our exposure before its too late. Most of the time , stock crashes suddenly after some news comes out and we get stuck in the stock.
Kindly share your views on below points , so that we can try to minimize our losses in future.
What are the qualities of a good management ?
(till last year , I use to think that yes bank is bank with v good management , until issues came out in public)
How can we trust and verify the financial no.s. ?
( Some of the companies in which I have invested were seems to have strong balance sheet that time , but suddenly some news came and stocks got hammered and never recovered e.g. PC Jwellars , 8 K miles etc.)
Can the auditors be trusted ? If not , what is the option for a small retail investors. For many stock
auditors resigned suddenly and stock was hammered and never recovered.
Assuming we invested for long term , is it wise to stay invested having a huge notional loss , assuming that management will change and things will improve in long term (example , YES Bank) , I don’t know what Long term means here , ( 5 years , 10 years or more than 10 years). How long should we wait for things to revive or we should book losses and look for some other stocks.
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