How to pick stock (part 12)

Fonics was my bad investment.

I bought since late 2005. I was fooled by the annual report written by the management. Their business relies on four main categories, but the biggest categories only gave a very low margin, reason being was it bargain power against customer was low.

Lesson learned
- don't invest in just listed company. Risk was too high.
- when you see the profit margin was dropping, most probably is caused by inefficiency of the company or caused by the tighter competition in that industry.
- when you see asset turnover is getting lower, it can be because of the company just started to invest more and revenue can't catch the apes or because of current business model cannot handle the current situation. Management need to do something
- when bargain power against customer was low, this became a bad thing for us, this was because what I wanted to invest in was the good company with good business prospect and good management. This was the only company that I wanted to hold for long term.