Editor’s note: This article was first published in January 2011, and its 8-10% returns, the market climate, Iberia’s share performance and the Mapfre target of 2.31 euros a share all describe that moment. Iberia merged into IAG that same month. Nueva Rumasa entered insolvency proceedings in 2011; many small investors in its promissory notes and capital increases were not repaid, and members of the Ruiz-Mateos family later faced fraud charges. This article is kept as a historical record and is not investment advice.
After everything we’ve discussed about Nueva Rumasa, the Dhul capital increase and later the Clesa one, I don’t intend to analyze the company or go back over the debates we’ve had across these articles, in which workers accused Nueva Rumasa of not paying on time and it was claimed that Nueva Rumasa owed money to its suppliers.
Amid all this, some investors decided to invest in Nueva Rumasa. Once again, every analyst advised against this kind of investment, which offered returns of 8–10%. Any stock market analyst sees that as dangerous, knowing that even on the stock market, in the current climate, it’s hard to get that kind of return over 12 months.
Well, I have to say that Nueva Rumasa has delivered for its investors. I have no idea whether the workers and suppliers have been paid, but the investors have got their capital back with the promised return.
Was it a risky investment? Of course. Otherwise it wouldn’t have offered such high returns.
I don’t want to stray from the subject, but when you decide to invest your money, don’t let yourself be swayed by analysts (who are statistically wrong 70% of the time). And so that analysts aren’t remembered only for the 30% of their “predictions” they got right, let me point out that at the start of 2010 they strongly advised against investing in airlines, and, lo and behold, one of the stocks that has kept rising is Iberia.
I don’t want to come across as arrogant, because I know my limitations as an investor. But as soon as Mapfre reaches €2.31 a share, I’ll be able to say I’ve been investing in the stock market for 10 years without a loss so far, while admitting I know nothing about technical analysis. To me, a “sideways resistance movement” sounds more like a body posture than something a share does 🙂
Also, when people talked about investing in Nueva Rumasa, many forgot one thing: a company can delay paying its workers and dodge paying its suppliers, but it has to look after its investors, because if the capital stops coming in, there is no company.
I don’t mean to sound insensitive, and I truly hope all of Nueva Rumasa’s workers get paid, for everyone’s sake. I just wanted to give a practical example of what you should analyze when you invest and, above all, what you shouldn’t listen to.
Further reading
- How you can go broke investing in the stock market
- What Arthur Rock looks at before investing
- How to analyze shares before investing
- Common mistakes when investing in the stock market
- Serious mistakes to avoid when investing
Featured image: Ervins Strauhmanis, CC BY 2.0, via Flickr.
