Guide to Analysing Companies

Plain vanilla
A financial instrument in its most basic form, with no
bells or whistles attached.
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Poison pill
One of a number of techniques used to fend off a hostile bid
or unwanted takeover. In principle, a poison pill is something
that turns nasty when swallowed – that is, a large financial
penalty that is written into a company’s articles and that is acti-
vated only by an unwelcome takeover, thus deterring suitors.
The practice became widespread in the United States during the
1980s when predatory companies pursued their prey with the
help of junk, or high-yield, financing. Poison pills are frowned
upon by regulators in most Anglo-Saxon jurisdictions.
Ponzi scheme
A classic confidence trick that has been repeated many times
both before and since Charles (Carlo) Ponzi gave it its name in
the 1920s. The scheme begins with a crook setting up as a
deposit-taking institution. The crook invites the public to place
deposits, offering them a generous rate of interest. The inter-
est is then paid out of new depositors’ money, while the crook
lives well off the old deposits. The scheme collapses when there
are not enough new deposits to cover the interest payments on
the old ones. By that time, the architect of the scheme hopes to
be living under an assumed name in a country with few extra-
dition laws.
Portfolio
A collection of financial assets belonging to a single owner – an
individual or some kind of institution. A well-diversified portfo-
lio will contain a mixture of assets, ranging from fixed ones such
as property to more liquid ones such as bank deposits, bonds,
gold, and stocks and shares. Many financial institutions, in-
cluding private banks, offer services designed to preserve the
capital and to maximise the investment income earned from
it without taking on too much risk. Others will become cus-
todians and take care of the settlement of any transactions