Beware of company extravagance


If you ever read the classic investment guide ‘Common Stocks and Uncommon Profits” from Philip Fisher, to whom Warren Buffet adore sincerely, you certainly went through various dimensions that an investor should keep in mind before selecting any company to invest.

Strong marketing organization is one of the dimensions among the four he mentioned, where he clearly explain the importance of marketing to popularize the product to the market.As we saw now, companies spending considerable amount to market their products through possible advertising methods. Of course, this is required to introduce the features of the product to potential customers and register huge sales and profit. As an investor, you always required to monitor your company’s marketing strategy to identify not only the efficiency of its marketing organization but also, how proper they are to spend investors money to get maximum benefit. I will start with a nice example; recently I have seen a south Indian award night which was different from others in similar kind with its nature of lavishness and posh. The main sponsor for the award night is a well established, stock exchange listed FMCG company, who manufacturing cloth whitener and similar products. They might have decided to sponsor such posh, money eating but useless award nights by considering the state, from where their major part of revenue is coming. As a result, the show was a clear symbol of extravagance and best example to show how an irresponsible company spending its investor’s money lavishly for useless purposes.If you are an investor and saw the show, run away from the company by selling their shares as early as possible. Such companies doesn’t have any ethics on how to use investors money in a better way but, spending huge amount in the name of marketing but the result will be considerably poor because of the limited viewers or territory status.

Always keep an eye on such companies who wasting investors money by conducting/sponsoring such useless sub-stream programs, that only intended to a particular territory or people, instead of the mainstream. Be aware to get away from such companies by keep in mind that, they are not qualified to use money in a better way to give value to their investors.

Secondly, avoid any companies that continuously sponsoring costly reality shows in the territorial televisions. This is not only an extravagance but if the best way to loose investors money to a great extend. This will never work as an advertisement purpose but, the money what they are spending for such not going to get enough attention because of the limited viewer status of such shows.A company with well organized marketing organization never select such extravagance to market their product. Instead, they will promptly and efficiently use the money in a cost effective way to pass the product information to maximum possible people by adding mainstream advertisements and its translation to all the required languages. No investor friendly and responsible company spend there money in a useless way, like the above mentioned one.If you are investor, keep an eye on this point.Feedbacks on this article are most welcome. Also, inform if you found anything missed on this article or need me to add any points or changes with the same. 508719-5435452