We always focus on identifying best business opportunities to invest with. Did anyone of you analysed any business that had poorly performed in the stock market? Well, if not, here are the few examples I am going to share with you in this post.

We will be looking at the following businesses that have really not helped investors to make any money in the last five years. They are as follows:

  1. Bharti Shipyard
  2. Jaiprakash Associates
  3. Kingfisher
  4. Suzlon Energy

All of the above businesses have been a darling businesses of many analysts and also in the media who have at many points have advised investors to buy them. Let’s look at them individually and learn a lesson from it.

Bharti Shipyard:

15th Jan 2010 this business was trading at Rs 352 per share.

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Let’s start looking at the Balance sheet of this business. In 2010 investors of this business contributed Rs 842 crore and then management borrowed Rs 2301 crore from financial institute to run and grow this business. Altogether Rs 3143 crore was invested in this business. Fast forward to 2014, they are officially bankrupt as investors have lost all of their capital and the business is sitting on a huge pile of debt. This is the classic example of managers not working in the interest of shareholders. Businesses done on leverage are very risky, if your goal is not to lose any of your capital then my advice will be to avoid investing within them.

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They had Rs 435 crore fixed assets. To run their day to day business, their working capital in progress was Rs 715 crore. They already had inventories of Rs 1233 crore. 75% of their current assets were inventories.

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The total net sales for the year end 2010 was Rs 257 crore. One fifth of their total inventories were converted into sales and there was still 3 times more to their actual sales they have their capital invested. After all expenses they were able to generate Rs 130 crore in profits. Many red flags rise looking at their financial statements. Few to share with you will be, do their products have good future prospects? Will there be a good demand for their products in the future as their inventory levels are very high and has been always like that for the whole year.

Jaiprakash Associates:

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The same story is repeated over here, the business is highly leveraged and business revenue has grown by almost 20% still that has not helped investors in any ways to create wealth.

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Investors forget about what extra money was invested in the business to keep on going as Bruce mentioned in his presentation.

Kingfisher:

Kingfisher Airline was already bankrupt 5 years ago, it just took so long for the market participant and investors to believe that they have lost all what they have invested in it.

Suzlon Energy:

Is it Suzlon Energy story is different? This business has not made a single rupee in last five years but investors and its management have borrowed almost Rs 2500 crore and shareholders of this business have lost almost Rs 6500 crore. They are still trading and investors do believe that this business will turnaround as they were able to restructure their debts.

As mentioned before, we don’t like to lose our capital and all these four businesses are not investment quality business. We do not gamble, we invest.