Open Question
i recently came across a relatively newly listed company that is in the truck
services business. with the rise in diesel fuel they lost more than 1/2 their
market cap. in fact it just keeps spiraling downward.
now here's the question. last i checked they have cash equal to 3x - as in
triple - their market cap. this is after a substantial cash burn for the last 2
years. i can't get my mind around this outfit.
how do you play a stock that has enough $$ to buy itself 3 times. i don't get
it.
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Agree with the posts below. The market is probably asking the company what the
heck they are going to do with all of that cash. The cash is probably a result
of the cash raised by issuing new equity from just being listed. Personally this
is why I always go beyond the numbers and try to get a handle of the business
and management. You can get a pretty good idea of how the company is being run
and what causes it to perform well or what will detract. You want to know what
they will do in the future as the market constantly discounts what it believes
will happen in 6 months to a year, and in many cases much longer.
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Agree with the posts below. The market is probably asking the company what the
heck they are going to do with all of that cash. The cash is probably a result
of the cash raised by issuing new equity from just being listed. Personally this
is why I always go beyond the numbers and try to get a handle of the business
and management. You can get a pretty good idea of how the company is being run
and what causes it to perform well or what will detract. You want to know what
they will do in the future as the market constantly discounts what it believes
will happen in 6 months to a year, and in many cases much longer.
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Some companies are set up by someone with alot of cash who wants to start or be
in business and th eidea sounds good but they don't realize just because you
have a ton of deniro does not mean you know how to turn it over and make a
profit. Does not mean customers will just be there or that you know the strategy
of growth. There was a company on thr Street.com last year that came on like
gang busters, but I could tell ~they had a great idea "theotetically and
lots of money, does not mean sales will flow and it will all go as planned, in
fact it hardly EVER goes as planned, it takes time, growth, strategy and
experience....
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well you don't for the main reason you cant understand the whys.
Remember the market likes growth, growth, growth.
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