G'day Fefifofom, Good question mate.The reality is that long...

G'day Fefifofom,

Good question mate.The reality is that long term investors who hold and continue to hold onto their shares for the longer term are firstly way in front as for as returns are concerned i.e. dividends over the 10-12 year period have been more than enough to pay for their investment alone.Secondly the intrinsic value of the business has increased over the 10 year period compared to companies who have destroyed wealth over a 10 year period.So if the past is a good indicator for the future than one can continue to believe in the story and let management do their job.But always be on the look out for stupidity by Management i.e. over paying for assets,putting in silly bids to acquire another company,debt to equity ratio to high,borrowings increasing and watch out for "oops i payed to much" i.e. goodwill/intangibles on the rise each year and the majority of this being classified as shareholders equity i.e recipe for disaster.Thirdly investors are hoping management can continue to maximize shareholder value on a year to year basis and most importantly management that consider the interests of shareholders in its business decisions moving forward and "Not their own interests".

What i'm looking for is the profitability of the company i.e. How much was required to produce the return? and if a company can continue to produce a high r.o.e.(return on equity)well into the future then there better off keeping the money and compounding at a rate that's better than what you and i can get elsewhere.But if they can't then you should demand the company to pay out a dividend because the retained profits can't be deployed wisely.

Now keep in mind the above is only based on companies with earnings and a good indicator of track record for a company might be looking back say 5-10 years into Company Historicals and comparing that with today and seeing whether the business has changed or whether they still remain the same as for as profitability is concerned.Is their bright prospects for the future and does the business have a durable competitive advantage with honest and capable management running the business.



cheers mate...