Don't gamble on shooting stars, says investment expert
It's a plain truth and one that many investors have learned the hard way, by buying yesterday's star performers only to learn that they were gambling on shooting stars, not great investors. This was an important insight that keynote speaker Russell Invesments UK Managing Director Shamindra Perera brought at the Capital Market Awards and Forecast Dinner, the flagship annual event of CFA Sri Lanka held recently.
Past performance doesn't even provide significant insight into future returns, he said, adding that when one invests their client's money, you don't invest it just for performance but for robustness. "That's what your clients want. A company (when hiring a manager) doesn't get his/her past," he said, adding that past performance is a 'really poor' indicator of future performance.
Fools gold
Reiterating that today's winners are likely to be tomorrow's losers, he said that as the job market heats up there will be a propensity to dust off the behaviour interview in an effort to better predict the performance of each new employee. However, it's like fools gold. "Past behaviour doesn't predict future performance. A good person with all of the correct behaviours will underperform in the wrong situation. Neither are brand names."
Analysts at the Awards Dinner noted the importance of effective regulation.
"It (good regulation) works to foster efficient, objective and transparent markets and uses underlying principles of regulation and enforcement that are consistent for similar transactions and activities," an analyst said.
Corporate financial statements and their related disclosures are fundamen- tal to sound investment decision making, another analyst said. He said investments in financial markets and those who entrust their financial present and future to those markets, depends directly on the information financial statements and disclosures provide. "In financial reporting, standard-setting as well as statement preparation, the entity must be viewed from the perspective of an investor in the common equi- ty issued by the company," he added.
The flagship event of the CFA Society Sri Lanka, the CFA Capital Market Awards and Forecast Dinner continued to boost Sri Lanka's capital markets when it recognised those establishing industry benchmarks, spearheading governance and ethics to advance domestic financial markets. The Best Equity Research Report, Best Investor Relations and the Best Stockbroker Research Team are all reflective of the increasing improvement in quality and depth observed in the markets.Shehan Bartholomeuz of LOLC Securities wore the crown of 'The Best Equity Research Report' for research conducted on Central Finance PLC, while the silver was also won by LOLC Securities' Damith Wasantha for his report on Access Engineering and the bronze was for the team from Acuity Stockbrokers comprising Chethana Ellapola, Anjula Nawarathna and Anouk Weerasinghe for their report on Textured Jersey Lanka. Certificates of Commendation were presented to Chevron Lubricants and Ceylon Tobacco Company equity research reports, analysed and reported on by Candor Equities' Pasindu Perera and John Keells Stockbrokers' Lourdeena Kudaliyanage, respectively. This key award was evaluated by eminent industry experts in equity markets on financial analysis, valuation, industry overview and competitive landscape, compa- ny overview, value drivers and share dynamics and investment risks and recommendations.
Assessed on the strengths of investor relations practices and responsiveness, communicating interactively with the investor community, accessibility of management, quality of disclosure and transparency, fairness in disclosure and consistency of investor relations function, Dialog Axiata was hailed from among 16 shortlisted companies as the entity having the Best Investor Relations for the third consecutive year. NDB won silver and Sunshine Holdings gained bronze. One part of the assessment in selecting the Best Stockbroking Research Team consisted of an independent panel of four judges evaluating the quality and extent of the coverage. The other encompassed an independent survey conducted among user groups including Registered Investment Managers, Licensed Unit Trusts and Large Corporate Investor picked John Keells Stockbrokers for the Gold, while Certificates of Commendation were presented to Candor Equities and Capital Alliance Securities. The Award is based on depth and breadth of coverage, forecast and stock picking accuracy, industry knowledge, timeliness of ideas, responsiveness to investor requests, timeliness and dissemination of news and reports and corporate access.