I always say that I have been mostly lucky as an investor. The operative word is “mostly”.

Long time readers would remember the narrative for Marco Polo Marine, a business which transformed from a tugs and barges operator, it was doing all the right things to grow stronger, adding value over the years.

In fact, Marco Polo Marine weathered the Global Financial Crisis well and remained profitable even through bad times. That says something about their management.

When I decided to invest in Marco Polo Marine, I noticed persistent insider buying a few years ago and their prospects were good. They started to pay meaningful dividends too.

It was likely that conditions permitting, dividends would continue as the founding family had a 60% stake in the business and they still do.

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So, what went wrong?

Marco Polo Marine is in a cyclical industry and in a cyclical industry, we have to expect down cycles. They managed to survive previous down cycles because they were more conservative.

That is a lesson from this episode.

Any company in a cyclical industry might want to be more conservative because we don’t know when things might go down and for how long they might stay in the doldrums. Trying to do too much with a weak balance sheet could be dangerous.

I have said before that if a highly geared business has strong cash flow, then, it could cope with its debt. Yes, it is about having a healthy interest cover ratio. This was from 2015:

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This was why I avoided the likes of Otto Marine although some of us might remember how there were write-ups on how they changed their business model and things could become better. It was all too speculative for me.

I didn’t buy into Nam Cheong as well because they were building vessels in anticipation of buyers which looked smart during good times.

Swiber, I avoided and I probably blogged or talked about avoiding their bonds too.

Comparatively, Marco Polo Marine, to me, was a safer investment although it was a smaller business.

Unfortunately, when bad times strike, cash flow could dry up, especially when the bad times have lasted as long as they have for the O&G businesses. This dry spell has been the worst and the longest for the industry.

I am not writing off Marco Polo Marine yet because it is not over until it is over. However, although they are not a Swiber, there is a chance that Marco Polo Marine might suffer the same fate. If that should come to pass, I will have to write off what was once upon a time a $100,000 investment.

This article originally appeared on AK’s blog.