Know Your Vowels, Please...

I kind of feel stupid right now. After 40 years, I still got my vowels mixed up. Surely, I meant to keep the "o" and not the "e". What am i talking about? Read on....

In 2007, I had this grand investment idea that surely China will be water scarce given the pollution in the country. Hence i went about investing in companies, engaging in waste treatment, pollution control etc. The two companies I picked was Sino-Environment (SINE) and Sinomem (SINO). The former was into desulphurisation while the latter was into water treatment. Both had good balance sheet (and so i thought).

In mid 2008, SINO announced that there were accounting irregularities at its subsidiaries which would impact its profitability adversely. Given this, i felt it was better to sell the investment away as it was tainted.

In end 2008, SINE announced that its Chairman had lost its entire stake in the company to a Hedge Fund as the Chairman had pledged all his shares to them. This resulted in a management change of control that triggered loan convenants etc. Also the company's ability to remain as a going concern was threatened as the Chairman was the key man to the business. The stock unravelled. Interestingly, there were no breaches of rules, even when the Chairman failed to disclose its share pledges.

In the meantime, there were no further bad news on SINO. Today, as I write, SINO has recovered 8X from the lows, while SINE languished at the bottom. As it turned out, the "O" was Outstanding while the "E" got Executed. And I kept the E. Sigh, that's investment.

So what is the moral of the story? When investing in Waste, make sure it is referring to the product and not the company. I invested in toxic waste...little did I realise that it was the management that was toxic.