Which stocks performed worst in last six years? What are their common traits?

Thu, Sep 27, 2018 9:46 AM on Exclusive, Stock Market, Latest,

~Krishna Khatiwada

In this research, we have taken a stock purchased date as 1st January, 2012. However, considering the availability of the stock on the said date, we have considered stocks which are available between 2012 and 2013. CAGR is calculated by adjusting the time period, dividends and right shares. In this article, we have focused on operating profit, net profit, AGM, and dividend history. There are various factors which change the market price. Here is the list of those company:

  1. Bottlers Nepal (Balaju)

It has started its operation from 1973 AD. Bottlers Nepal operates in two parts of the country namely Bharatpur, Chitwan as the name of Bottlers Nepal (Tarai) and other operating in the heart of the country at Kathmandu with the name: Bottlers Nepal (Balaju).

The stock of Bottlers Nepal (Balaju) was available on 12th April 2012 at Rs 1690 and its current market price is Rs 1660. Bottlers Nepal (Balaju) has distributed 60% cash dividend from the profit of 2069/70 and has conducted AGM regularly without missing a single year in the past six years. The company has announced a 20% bonus from the profit of 074/75 and in between, it has not distributed dividends to its investor. Cash dividend adjusted CAGR of the company is 1.069% in the past 6 years.

The company's official website is http://www.khetan.com.np/bottlers_nepal.htm  but the clear information of the company is not available. Furthermore, the company's annual report and quarterly reports are not easily available. The company is lacking in transparency and has not distributed dividends regularly. The figures on the balance sheet are looking fine and the company has conducted a regular AGM. The reason for its worst performance could be due to the shortage of share supply.

  1. World Merchant banking and finance limited

It has started its operation from the year 2058 BS. However, there is no information of its listing on NEPSE. Annual report and quarterly report of the company are not easily available and the company does not have its website. The WMBF has conducted its AGM in 2017 for the financial result from the year 2068 to 2072. AGM for the financial result of FY 2072/73 is conducted in 2018. The company has not distributed any dividend in the past 6 years. Irregularity in AGM has been observed further leading to lack of transparency.

The stock was available on 8th January, 2012 at Rs 89 and after six years its price stands at Rs 95 with the CAGR of 0.86%.

  1. Progressive Finance Limited (PROFL)

It is a "C"-class licensed financial institution registered on 14th Ashwin, 2051 under the Company Act, 2021 BS.  The company went public on 28th Shrawan, 2064.

The stock of PROFL was available on 16th January, 2012 at Rs 129 and its current market price is Rs 101. The company had issued right share in 2015 and 2018. The right adjusted CAGR of the stock is (-3.57%). The figure below shows the performance of the company in the last six years.

The company is struggling in making profits through its operation and numbers in the profit and operating profit is absolutely random. The company has not distributed any dividends in last 6 years. We can get a sound information about the company on its official website http://www.pfltd.com.np/  but the financials of the company have not been uploaded. We can say that the company is losing through its operation, AGM were not regularly conducted, and the dividend is not distributed.

  1. Corporate Development Bank Limited (CORBL)

Corporate Development Bank Limited is a "B" class licensed financial institute operating since November 2007.  Corporate Development Bank's stock was available on 12th January, 2012 at Rs 124 and its current market price is Rs 100.

Company's official website is http://www.corporatebank.com.np/ but the financial statement of the last six years are not available. In past 6 years, company has neither distributed any dividends nor issued right shares. The company has conducted its last AGM in 2014. If we have invested in this company on the said date then our investment would have shrunk by (-3.15%) annually. We can say that the company is lacking transparency, is irregular in conducting AGM and no dividend distribution policy.

  1. Bishal Bazaar Limited (BBC)

The information regarding the company's profile is not easily available. The stock of the company was available on 10th January 2012 at Rs 2598 and its current market price is Rs 1700. If we had invested in (BBC) then our capital would have shrunk by (-6.12%) annually.  The company has a website http://www.bishalbazar.com.np/  but it is currently under maintenance. I have considered the data of 3rd quarter of the respected year as the 4th quarter result was not available.

From the table above, we can say that the company is making decent profit with the positive growth but the company has not distributed dividends in past 6 years. Investors are wary about irregular AGM and lack of transparency.

  1. Multipurpose Finance Company Limited

The stock of the company was available on 12th January, 2012 at Rs 415 and the current market value of its stock is Rs 183. The company has distributed bonus from the profit of the fiscal year 69/70/, 70/71, and 71/72. The company doesn't have its official website so the information about the finance company is not available easily.  The bonus adjusted CAGR of the company in the past six years is (-8.18%).

The company has conducted regular AGM but has irregular dividend history. However, the company has not conducted AGM for the financial of fiscal year 73/74 and 74/75. The figure of profit and operating profit is highly fluctuating.  The company is looking decent by its performance and management operation but has been listed in worst performer stocks.

  1. Best Finance Company

The BFC is incorporated under Company Act, 2063 and duly licensed by Nepal Rastra Bank (the Central Bank of Nepal) as a "C" class financial Institution as per Banks and Financial Institutions Act, 2073.  The company was started as the General Finance and later, the company has changed its name to Best Finance. During the course of its operation, it faced a huge crisis of loss in the paid-up capital of the company due to the then malpractices of corporate governance. The company was declared as the problematic financial institution by Nepal Rastra Bank due to this reason (taken from the company's official website http://bestfinance.com.np/.)

The information on the company is transparent, though all the financial data are not uploaded to its website. The stock was available on 2nd January, 2012 at Rs 503 and its current value is Rs 100.

From the table above we can say that the company was not able to make a profit through its operation and it has not distributed any dividends in past six years. If we have invested in the Best finance on the said date then we would lose more than 80% of our investment capital with the CAGR of (-21.33%).

If we include the average inflation rate of the last six years which is around the 7%, then we would have lost much more than the said value. Inflation-adjusted annual loss in best finance company is (-21.33%)-(7%) =-26.16%. Such losses can destroy the person's mental and financial health.

Key things to remember:

  1. Avoid stock that conducts AGM irregularly.
  2. Avoid stock with negative and highly fluctuating operating profit instead choose the company with stable operating profit growth.
  3. Choose dividend-paying stocks and avoid the stocks which escape dividend and AGM.
  4. Avoid stocks that provide an incomplete information. Instead, go with the transparent companies which provide clear information.

(Note: We have researched only on the worst performer and there is a possibility that very few high performing stocks could share the same traits. However, it is suggested to avoid a company that has the above-said character)