I once spoke with an investor who had a very simple philosophy when it came to managing money – ‘avoid the clangers’ (the mistakes). He spoke of his belief that if one was to avoid the disasters, preserving capital and indeed beating the market became a much easier task.

So how do we avoid the ‘clangers’? Reviewing a case study may shed further light on some of the key metrics we can identify to preserve capital and ‘avoid the clangers’.

Transpacific Industries Group (ASX:TPI) provides integrated industrial cleaning and total waste management solutions to customers across Australia and New Zealand. It also distributes a range of heavy commercial vehicles.

Figure 1. Price Chart: Transpacific Industries Group Limited

As can be seen from the above price chart, the previous five years has seen a precipitous fall in the market capitalisation of TPI. Those who have held onto their part share of TPI during this time have endured significant capital losses. So this begs the question; could this have been avoided?

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