The risk always with a business which underperforms, is that an investor gives credence to the excuses for poor performance, or unexpected adverse conditions, and continues to hold (or worse, invests more) and performance continues to slide. Expectations get slowly moderated downwards, perhaps unconsciously to some extent. Leading to death by a thousand cuts.
@jg123456,
You have said it very well.
Coincidentally, "
death by a thousand cuts" is exactly the phrase I use when I describe those sorts of situations to anyone who cares to listen.
I can't count how many times over my investing life I've seen company boards go on acquisition sprees in an attempt to cover up earnings holes in their core businesses. And yet almost all investors merely look at the resulting impressive-looking headline growth numbers that are presented by company management, without assessing how the business is performing if the newly made acquisitions are stripped out.
And many seasoned executives can cast things in very rosy terms contained in glossy, professional-looking presentations, should they have a desire to mask over any problems.
In relation to ZNT, what they are trying to do, in terms of the growth strategy, is by no means a slam dunk.
Execution risk is not low (one just needs to look at PRY to appreciate how corporatised healthcare can go awry), and whenever acquisitions are undertaken on the basis of
supply-push (which is the case with ZNT), rather than
demand-pull, the risk of poor allocation of shareholder capital is high.
One needs to buy ZNT with eyes very much wide open. As it is, in the promotional material for the company, there is a bit too much emphasis - for my liking - on the great "macro" tailwinds supporting the business.
In my experience, poor execution by management invariably trumps any positive macro thematics.
"Trader friends always extol the virtue of stop-losses - which I have absolutely no regard for as a fundamental LTBH type investor."
By coincidence, based on a post made only this very day, I agree emphatically:
https://hotcopper.com.au/threads/calm-before-the-storm.3356349/page-87?post_id=24468939#.WQqx1oh96Uk
