Obviously no one trusts lawyers - or no one sensible does. Several years ago I was involved in a property dispute that went to VCAT. In total there were six lawyers involved including the judge (well civil court equivalent of the judge) - three of the lawyers were parties to the dispute and not acting in a professional capacity. As the case progressed it turned out that the judge was openly biased based on what appeared to be a personal dislike of one of the lawyers (and she made no attempt to disguise this); all the lawyers except one repeatedly lied, the one that didn't lie was unfortunately one of the practising lawyers and he turned out to be dangerously incompetent; and to top it all off one (who was party to the dispute) committed what i consider to be borderline fraud i.e. allowed the incompetent lawyer to represent him and indicated to me in advance that he had no intention of paying the man - and in fact he did not pay him (I tried to warn him but wasn't listened to). All this doesn't begin to describe the surrounding cluster f*ck - I could bore you to tears. Suffice to say that my own personal experiences with the legal profession can be considered to be somewhat negative. Anecdotally of course.
I'm reasonably familiar with Buffett's comments on diversification. I think that this is somewhat different scenario. His statements relate to investors spreading their money around multiple types of businesses leading to them investing in companies that they likely do not understand. If you focus on a core group of businesses and make a concerted effort to understand them then the quality of your investment and you knowledge of when to buy and sell is likely to improve. The point being that you're 81st best idea is likely to not be as good as your 1st 2nd or 3rd best ideas. It should be noted however that Buffett's company Berkshire Hathaway owns something like 80 businesses in diverse industries (insurance, rail transport, fast food, etc). He also advises that novice investors should invest in exchange traded index funds (extreme diversification) rather than trying to play the market - you won't become mega rich this way however mathematically you will beat (slightly) the average investor returns.
The key point is that if you are investing in specific firms you should understand the business in and out first, in Shine's case we are outsourcing this investment decision to Shine's executives and trusting them to have the requisite knowledge. In theory they are experts in legal firms and we hope they can do a better job of assessing legal firms than we laymen can. If you don't have this confidence then you should not invest in Shine. There is nothing inherently "bad" about this diversification - unless you have information that you have not presented. Again regulatory risk can have a heavy impact on the profitability of a firm like this and it is smart to hedge this risk by slowly and carefully branching out into other legal areas. Shine just need to keep expanding their circle of confidence and make sure they don't invest outside of it. By the way segmented figures are available in the reports - though they could always be more detailed.
It's at this point I question if I am being trolled. The point you raise about outsourcing - this is impractical however if Shine hypothetically found a way to make it work then this would be a massive positive for Shareholders. It's absurd to me that you would consider this a negative. I mean for a customer it's negative but not for us: provided the differences in costs vs amount charged to customers were sufficiently obfuscated and that's not difficult to do, especially for a lawyer.
SHJ Price at posting:
68.5¢ Sentiment: Hold Disclosure: Held
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