I'd say the reason I don't like "cash in search of a business" stocks is that I'm not good at selling them. They spike, I get hopeful, I don't sell. Mistake. Seems like it may be an ability or an agility which I just do not have.
I get in a mindset with these things that tests my patience also. Where I figure, here's a management that screwed up one business but were lucky or smart enough to have a bunch of cash left. And now they're going to try something else. What makes them (or me) believe they can do better the 2nd time? When they are likely competing with an already-entrenched company or else will be trying something totally new, how do I assess management's chance for success?
And as I say, other issues beckon me. For example IPG (I am using this as an example & not a recommendation for anyone), an umbrella of the world's biggest advertising agencies. Yes, the stock's come down, yes it's relatively expensive (compared to net-nets for sure), but it's selling at a multiyear low in terms of price/book and price/sales. It's hard for me to believe there's a business risk for this company (in the sense that they are likely to go bankrupt) or that they would ever have a problem in hiring competent managers in the depth they required (unlike microcaps which can be woefully understaffed and incestuous). At some point the advertising market will pick up. Imo. I expect IPG can get back to its prior years' average price/sales or price/book (assuming that low interest rates will tend to keep p/e's high as compared to the 1970's when there were high interest rates and low p/e's on growth stocks.) I can envision having a profit in the stock as the stock price climbs upward. That's something I just can't see with "cash in search of a business stocks".
I assume it's a personal issue for me, that I don't like and avoid "cash in search of business stocks". I will buy net-nets occasionally, and some of these may be close to being in the "have cash-seek business" category. I'm just not logical or consistent here, I guess. One for you to check in this possible dual category might be ECOM (I have it on my watch list.)
--------------
I looked at XPRSA again. Looks like a decent buy point here to me also. |
