Ann: Half Yearly Report and Accounts December 2015, page-13

"but the biggest query for me is: How good are they are at hiring and training their sales teams? I don't doubt their products are good, but it seems they've been almost constantly restructuring their Brazilian, US and European sales forces over the last 5 years."

@Jimmy_C,

While the revenue traction in Europe and the US has been satisfactory, your point about this not translating into earnings from those jurisdictions is well-made.

However, the thing that exercises my mind with SDI in terms of where we might get the investment totally wrong and destroy the value of our capital permanently is not so much the quality and quantity of the sales capacity; rather it is in the bona fides of the product itself.

For if you have a good product, but it isn't being marketed and distributed properly, well then that is a problem that is fixable. It will cost some money and take some time, but it is addressable.

What matters most is that have something to sell that is unique, high-in-quality, reliable and durable, then that is by far what matters most.

For you can have the most competent and effective sales machine in the world, but if your product offering stinks, then you don't have a business. Period.

Which is why, in SDI's case I am highly sensitised to, and always on the listen-out, for reference to product standing and brand resonance, and related insights such as independent product endorsement, repeat orders, customer concentration and retention, trade terms ...that sort of thing.


"As an aside, there is a unquantifiable but real tail risk that something highly adverse happens to the company's Brazil operations, undoing the years of work they've put in there. I don't normally bother with macroeconomics etc., but Brazil right now is in the midst of its worst economic downturn in a century, there's a widespread political corruption scandal that runs all the way to the top and there's a chance of it all tail-spinning. Information recency prompts us to categorize Brazil as a stable, market-based economy as that's the way it's been in the last 20 years, but it was a basket case before that and could become one again if things really unravel."

One could spend every working day of one's entire life worrying about things that cannot be controlled, and if one did one would never come to owning shares in any business at all.

Which is why I ignore marcoeconomic factors and I focus my energies on understanding the nuts and bolts of businesses themselves.

My long-observed position is that good quality, well-managed businesses are able to prosper and flourish largely irrespective what happens in the external macro environment.

I am sure that, even if there is political turmoil, people will still have their teeth drilled and filled.

And besides, its not as if the market is capitalising earnings from Brazil at an astromical multiple. Why, if the board decided tomorrow that Brazil was all too hard, then it would result in a 20% uplift in Pre-Tax Profits, based on the latest reported result.

So the stock is not pricing in any success from Brazil, that's for sure.

And don't forget "Brazil" is not just about Brazil; it is the beachhead from which other South American regions are to be serviced. But like I said, the market is already totally sceptical about success here, imputing no benefit of the doubt whatsoever into the share price.

So, if it continues muddling along, well, that will not matter a jot in terms of the share price.

But if it does one day turn the corner, the incremental valuation uplift will surely be seen in the share price.