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0.General, 1.Market Observations, 2.share trading, 2.Strategy, 5.Troubled companies

28 Nov 2018 (TheAge,SMH,MONEY) – RCR Tomlinson’s collapse has lessons for retail investors

[COMMENT: This article from Marcus Padley includes some great comments and insights – well worth reading the full article.]

(28 November 2018, The Age, MONEY supplement, p2, By Marcus Padley)

‘Last year, RCR Tomlinson was a billion-dollar company. Last week, it went into administration. RCR went bust with a market capitalisation of $231 million. Two hundred and thirty-one million dollars one day, zero the next. Staggering. A lot of listed stocks have gone bust over the years, 20 Australian stocks in the past year. Well-known ones include Oroton and Quintis. Other memorable disappearances include Sons of Gwalia, OneTel, Mirabela Nickel, Babcock & Brown. All went bust with significant market capitalisations and that money evaporated in a day.’

<snipped…>

‘But this is not a blame piece, this is to make the point that if some of the most prestigious fund managers in Australia can dump tens of millions of dollars into a company three months before it goes bust, what chance has the lowly private investor doing amateur analysis from the comfort of their lounge chair or kitchen bench?’

<snipped…>

‘One of two things must have happened. Either the analysts were incompetent, which is highly unlikely, or the information provided by the company was incomplete. Either way, it is a wake-up call for all of us playing the equity markets, a reminder that analysis is hard and that despite strict continuous disclosure requirements, there are big gaps in the information on which the analysis is based.’

<snipped…>

Let it be known that brokers are rarely writing research to help individual investors make money. They are writing research to help themselves make money. The core purpose of the equity market is to raise capital, not to help investors. Research reader beware.’

Read more at SMH.com.au

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