07 July 2016

The Great Pacific Andes (De)Fault

When you have a stock whose name sounds like the San Andreas Fault, I guess it's only a matter of time before it follows its name sake disaster movie. So yes, Pacific Andes has gone Chapter 11 since.

Years ago, before I became discerning about value investing, I was pretty bought in to any "reasonable" story as a reason to buy a stock.

So what the devil was the story then?

Well, it was about the growing population of China and Asia in general. And with a growing population, demand for food will increase. Fishery provide the nutrients for the diet of a growing world. Blah, blah, blah.

So if you're holding on to any of its shares now, good luck. A million shares at $0 per unit is still $0.  Fortunately for me, all I have is 125 shares. I can live with it. How did I end up with 125 shares? It's another sob story.

I was lucky to have bought a few thousand shares in 2009 at $0.20 and sold them off at $0.34 less than a year later. It was speculative luck. I got out while the going was good. But I forgot about a scrip dividend taking place then! Oh well. Overall, it was still a profitable trade.

[When an associated company (Oceanus) had its whole abalone stock die on them, it was kind of a warning indicator to me. Super RED FLAG!!]

Lesson learnt:
Forget all the fanciful stories. Ultimately, it's about a well run business, in a market where its products sells and can clearly generate recurring income with very little capital investment. One with positive free cash flow, good ROE, ROA, and gives out a sustainable dividend, year after year, in good times and in bad times.

Considerations in Stock Picking


Cory said...

Agreed. Capable Management is important.

Lizardo said...


Capable and trustworthy as well.