DYNT started trading today with reduced number of OS shares that resulted due to the magic word "Reverse Split". With this the float is now at 1.6 Million shares. I tweeted about DYNT at $3 and it jumped to $3.75 immediately. Some of my Twitter @IncredibleTrade followers banked the call. If you guys remember we did trade DYNT in 2011, entered at $1.20 and got out at $2.00 Click here for 2011 post. This time it's going to be more fun...Thanks to Reverse Split fever that is going contagious for this Christmas! I have not kept track of this company for a while and hence I do not have much to write about their financials or progress. Please take this as a Reverse Split frenzy play for now. If there is anything that is worth mentioning I will write it in the next post.
You can not afford to miss another opportunity like BOSC, SLTC, RNIN, and DYNT so follow me on Twitter @IncredibleTrade. Don't forget to turn your "Mobile Notifications" feature on otherwise you will not receive my instant updates.
WARNING! Do not text while driving and also Don't go on volumes with micro float stocks as they are extremely risky.
A general Caution and Advise - As I always advise in my posts, Do not chase stocks. please keep in mind that I am not a Stock Market Analyst or an Investment Adviser to count on my recommendations/alerts. As always please do your DD before investing or speculating, start with a small position, always keep your stop losses in place and emotions out. Finally thank me for your profits but do not blame me for your losses because you are the one who pulled the trigger!!!
You can not afford to miss another opportunity like BOSC, SLTC, RNIN, and DYNT so follow me on Twitter @IncredibleTrade. Don't forget to turn your "Mobile Notifications" feature on otherwise you will not receive my instant updates.
WARNING! Do not text while driving and also Don't go on volumes with micro float stocks as they are extremely risky.
A general Caution and Advise - As I always advise in my posts, Do not chase stocks. please keep in mind that I am not a Stock Market Analyst or an Investment Adviser to count on my recommendations/alerts. As always please do your DD before investing or speculating, start with a small position, always keep your stop losses in place and emotions out. Finally thank me for your profits but do not blame me for your losses because you are the one who pulled the trigger!!!
I find that the best indication of how undervalued a stock is is the price to sales ratio or what is commonly referred to as market cap.
ReplyDeleteSimply stated. If a company does 1 billion in annual sales but it has a market cap of 100 million dollars than the price to sales ratio is ten to one. In other words the market is valuing a company that does 1 billion dollars in annual sales at just 100 million dollars. But what does this mean. It means everything if you are a classic value investor.
Here is a perfect example of why the price to sales ratio is so very important if you are a value investor in stocks. If our 1 billion dollar company is breaking even that is they are not making a profit nor losing money. Lets say the company has 250 millon dollars in long term debt and 80 million dollars in cash. We will say they are in the food business they make a wide aray of food products. Maybe the company did a buyout of another company a few years ago that did not work out as well as expected. So thats why the company is having trouble making a profit but things now seem to be moving in the right direction. If I purchase shares in the company for say 10 dollars. And over a five year period the company improves their earnings performance to the point where their now earning say 60 million dollars on sales of one billion two hundred million dollars. Thats a profit margain of 5%. If the stock were to now trade at twenty times earnings that would now mean that the price of the stock would be at 120 dollars a share or another way to put it the marketcap is now one billion two hundred million instead of 100 million.
The problem for me is not that this investment method is not effective it works great. I purchased seaboard stock back in 2000. I think it was for 190 dollars a share around that. I following the exact method I describe above. I sold my shares about five years later for 2500 dollars yes thats correct 2500 dollars or more than twelve times what I paid for the shares. Seaboard was profitable when I bought it and profitable when I sold it. The stock was just a great undervalued stock that was overlooked by investors.
Like I was saying before the problem is not with this investment method. Its that stocks like seaboard are very rare indeed theirs just not a whole lot of quality companies out their selling a very low price to sales ratios. Another issue that I have been having is when a company of decent quality trades at a very low price to sales ratio its not long before a private equity firm or the family of a family owned company takes notice and usually makes a low bid for the shares and takes the company private preventing me from realizing the enormous gains that mght have been possible had I not been forced to sell my shares out to a party that was making a very unfairly low offer for the shares of the company.
Another thing to keep in mind when it comes to value stocks that have a low price to sales ratio that could give the buyer a tremendous advantage is this.
I mentioned earlier that are food company had 80 million dollars of cash on their balance sheet now if the company choose to they could buy back a large chunk of their stock maybe 30 million dollars worth of the shares outstanding it would only cost them 30 million dollars they still would have 50 million dollars of cash left on their balance sheet. This means that under the positive earnings outlook for the company the stock price could even be much higher than 120 dollars a share. If the company were to retire a large percentage of their exsisting shares in a stock buyback.
Thanks for the nice write up. It helps our subscribers! Keep up the good work.
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