Read the fine print: Perennial
Investors should be reading the “fine print” in companies’ annual reports, a lesson learnt from the financial crisis.
John Murray, managing director of Perennial Value Management, said of the key issues emerging from the crisis, investors have realised the importance of reading the “fine print on the back of an annual report”.
“It sounds like a pretty simple one, but it’s something investors generally forget to do,” Murray said. “I’ve always thought that at the front, the large print giveth, and at the back, the small print taketh away.”
Murray noted the ABC Learning experience as a memorable example.
“It was a stock that we never invested in, you know, for a whole lot of reasons. But … as you just kept flicking through the annual report and got towards the back, you started to really note the accounts, in terms of how they accounted for intangibles and the level of related party transactions and all that sort of stuff.
“You’re sort of reading all of this and thinking, hang on, there’s something not quite right here,” he said.
Murray said investors have also realised the significance of balance sheets to a company’s performance.
“We’ve always concentrated on the strength of balance sheets. However, that’s not always the case with all investors. In the good times, investors became preoccupied with earnings, and earnings per share growth,” Murray noted.
He said as investors entered the downturn, they realised the importance of soundly structured balance sheets.
Recommended for you
ASIC has issued infringement notices to two AFSLs over financial advisers providing personal advice while they were unregistered.
Australian retirees could increase their projected annual incomes by as much as 51 per cent through comprehensive financial advice, according to a Vanguard study, but cost continues to be an issue.
AMP has announced a senior appointment to its North leadership team, reinforcing the firm’s commitment to the advice industry.
Despite the financial adviser exam being rooted in ethics, two professional year advisers believe the lack of support and transparency from the regulator around the exam is unethical.