14 November 2018

Valuation: it’s most important, it’s least important

Hong Kong Economic Journal columnist Ah Mui used to work in one of the top accounting firms before joining the fund management industry. With friends from both businesses, Mui made some interesting observations.

Although accounting people are supposed to know a lot more about financial reports and what those numbers stand for, their investment performances tend to be far worse than those working for funds. In fact, most accountants ended up losing big time, Mui writes in Wednesday’s Finance DNA column.

So knowing less about accounting is better than knowing too much when it comes to investing?

The simple truth, as Mui points out, is that stocks of more profitable companies will not necessarily go up, and money-losing firms do not always see their stocks slump.

“Sometimes what you should care about most is valuation, but sometimes what you should care about least is also valuation,” Mui quotes this riddle-like investment advice of an investment veteran he knows.

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EJ Insight writer

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