As a small shareholder should you be ‘responsible’ for what the company does? Are you morally responsible for all farmer suicides if you are a shareholder of Monsanto? Are you ‘responsible’ for all the cancer caused by ITC?
Or should you stop enjoying Haldirams product because the owner was suspected and tried for murder? Should you stop eating there? Or should you sell of shares of a company which is in the meat business – assuming you are a Jain? What about a very big Onion trader who is a JAIN who does not consume it himself? Is he wrong?
Largely most of us know nothing about the promoters of the companies in which we own shares. So if we know something, or even a little bit we get judgemental. We make statements like “this promoter manipulates the government’ to ‘this promoter does not know anything about Corporate Governance’. Great.
I have or have had shares in say 50 companies – which include Tata group, Birla, Murugappa, Hdfc, Hero Honda, Mncs, – a big range. I have been (and will continue to be) biased against certain groups and geographies – and so much so that I do not even look at fresh data from that place. As a broker I had been approached by many companies which offered me lots of money to get their issue subscribed. One of them is now a blue chip from Hyerabad. I was offered ‘x’ amount per folio – we have a funny ‘minimum number of folios per Rs. 100,000 invested’ . I actually bought the share at Rs. 10 and sold it off at Rs. 30 – when the management said ‘enough’. Laughable? well yes. However, since then I am unable to buy that share.
Or take the case of Satyam – at Rs. 30 it was recommended by a broker who introduced me to the promoters. I did not like the broker. I did not like Hyderabad. I traded, but largely stayed away.
So one hit and one miss – for my Hyd bias. However I still hold Dr. Reddy’s Lab and am not sure how I got over the Hyd bias. Other than Dr. R’s Lab I have no company controlled from Hyderabad (had to say controlled because Coromandel International is largely run out of Hyderabad!).
When we know a promoter we judge him/her harshly. I know nothing about Mr. Soota or Ms. Shaw and I do not judge them on corporate governance, or any such matter. I have been a happy shareholder like I have been in most mncs. I do not even know the names of the managing directors (I know i can find it)..of Colgate, Gillette, PnG, Oracle, Siemens, Cummins, Nestle, ….and I do not seem to need to know. However in case of NBFC I am far more on the ball about the NPA, their falling market share, their lending pattern – but having concluded that I will invest only in family/ promoter run NBFC/Banks I am now invested only in Cholamandalam, Hdfc, Hdfc bank, Kotak, Bajaj, ….and Equitas. That is my bias. So whatever happens to the results I do not invest (I may trade) in Sbi, icici, axis, yes bank, indusind, ….- and I know I have missed out a lot of good growth. However, whenever i am asked to buy a fertilizer share or a bank I go and compare it to a Coro or a Hdfc and come to the conclusion that I could buy more of what I have 🙂 . That’s bias or focus you decide.
So to be a happy shareholder stick to the numbers. Cutting down bias is useful – and even the journey is fine, but i am unable to do it. Maybe Vipassana could help. Maybe.
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