Yes, you are correct. I thought I could try to estimate the situation through forecasts based on previous filings. Whilst it was a time-consuming experience and I finished with a result, it was probably a waste of time and it was speculative behaviour. I will monitor the situation but with no skin in the game. This reminds me of the Cutera situation - potential to skyrocket or fall another 90%. An interesting setup, but not investing. And because I poured in so much time to understand what was going on, I felt obliged to take a position. Stupid and irrational, I'm still making rookie errors.
That said, having reread my Buffett books, I'm consciously making an effort to focus on businesses with net cash positions (or low debt levels), some sort of genuine earning power and honest management at a fair price. That's it. There aren't many, but to say they've disappeared is untrue. I'm totally taking corporate debt out of the equation. Truth be told, it does scare me a little. I don't believe refinancing (for many debt-laden companies) is a good enough answer in the long-term.
An interesting idea - PNRG (O&G E&P company). 8x earnings, 1.5x book, no debt, EV/EBITDA sub-3x. Insiders own over 50% of the stock. Spotted it a few months ago at close to $100/sh, but passed on it to buy something dumb - because I'm an idiot.
Of course, this change in approach means my whole strategy has been uprooted. I've been mostly focussing on turnarounds involving debt, new CEOs and quite a few unknown factors. The upside potential is probably higher if you stick to this kind of strategy but it's not really investing - you have to put a lot of blind faith in management adopting a new strategy that delivers value to shareholders. And they'll never say it won't! I reckon an AI machine can deliver superior returns to investors focussing on these situations. For me, though, it's a headache. |
