Nemish Shah trims LMW stake, keeps Bannari Amman Sugars holding

Nemish Shah is a very private investor from India who has owned shares in two companies for a very long time — more than ten years.

The two companies are LMW, which makes machines used to spin cloth, and Bannari Amman Sugars, which makes sugar and also produces electricity.

Both companies have almost no debt, which means they owe banks almost no money — like having no credit card bills.

Over the last three years, Shah slowly sold a few of his LMW shares, but he has not sold even one share of Bannari Amman Sugars.

The reason is that their profits are not quite what they look like.

Most of LMW's profit comes from interest its big pile of cash earns, not from selling machines, and its shares cost a lot of money compared with what the company earns.

Bannari Amman's profit went up mostly because it paid less tax, while its factory business was actually a little weaker.

But Bannari Amman paid off almost all its debt and now makes lots of cash.

Shah's simple rule seems to be: always check where the profit really comes from, and don't pay too much for a share.