Blumont Group Ltd (SGX: A33) has lately been appearing on the list of shares in Singapore with the highest volume traded. Although the company’s share price is now just S$0.029 as compared to S$2.54 at its peak in 2013, it seems the market’s interest in the company is picking up again. Is it wise for investors to rekindle their interest in the firm after its troubled past? Blumont touched its all-time high at the start of October 2013 and carried a market capitalisation of more than S$4 billion back then. But, things unravelled quickly as its shares collapsed by more…
Blumont Group Ltd (SGX: A33) has lately been appearing on the list of shares in Singapore with the highest volume traded. Although the company’s share price is now just S$0.029 as compared to S$2.54 at its peak in 2013, it seems the market’s interest in the company is picking up again. Is it wise for investors to rekindle their interest in the firm after its troubled past?
Blumont touched its all-time high at the start of October 2013 and carried a market capitalisation of more than S$4 billion back then. But, things unravelled quickly as its shares collapsed by more than 90% in value in the space of less than a week during that month. At Blumont’s current price, it fetches a market capitalisation of a mere S$76 million.
What has been happening with Blumont
During the past year, there have been a number of changes going on in the company. A few directors have left their posts and Blumont is in the mist of several deals. One such deal sees the company proposing to takeover Genesis Resources Limited, a listed mining entity in Australia with a portfolio in gold, iron, manganese, uranium ,and other base metals. Blumont is also in the midst of a takeover of Merlin Diamond Limited, a diamond mining company listed in Australia.
Elsewhere, Blumont’s trying to make investments in other companies too. If all the investments and takeovers do happen, we might see a very different Blumont in the future.
But as it stands, Blumont’s still a company that’s not exactly in the pink of health. In its latest second quarter results, Blumont recorded a loss of S$10.1 million for the first six months of 2014; the figure is around 14% of the company’s equity (total assets minus total liabilities) as of the end of 2013. This indicates that the loss is quite significant.
Out of my league
To be honest, I found it challenging to go through the annual reports and announcements of Blumont. There are multiple on-going deals and it is unclear how they all might come together and change the company for the better or worse. I hate to admit it publicly – but trying to understand Blumont might be out of my league.
Yet, I believe there is no shame in passing on a company when you do not truly understand its business. Even the venerable investing duo of Warren Buffett and Charlie Munger do that all the time. Whenever they encounter an investing idea that’s beyond their comprehension (and it happens often, at least according to them), they toss them into a “too hard” pile.
There are 766 companies listed in Singapore as of June 2014. An individual investor might need, say, around 30 shares or so for a well-diversified portfolio – that’s just 4% of all the publicly-traded companies in Singapore.
Thus, what we need to know as investors is that we are spoilt for investment choices and we do not need to invest in every company we come across. As another famous investor Peter Lynch once said:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.”
I’ve not tried it yet, but I doubt a 10 year old kid (a fifth grader) would ever be able to understand me if I try to explain what Blumont is all about.
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