The dark side of global diversification

The earnings torpedo delivered by Ansell last week highlighted the dark side of global diversification for Australian based companies. The Chanticleer column in the Australian Financial Review wrote an excellent piece on the poor performance of complex, multi-national businesses, with assets located in multiple jurisdictions, including Ansell, Orica, QBE and NAB. The poor returns from ASX listed multinationals highlights just how difficult these businesses are to manage for Australian based CEOs. Evidente has updated its model of firm complexity, based on five factors, including product diversity and geographical dispersion. According to the model, the most complex stocks include: Seek.com, Qantas, Worley Parsons, AMP and Computershare (Ansell ranks in the top quartile of complexity). Investors should therefore be wary of complex firms with poor quality of management and weak governance structures. Read the full weekly impressions on the Evidente Blog (VIEW LINK)