Hey, heres my .10/.25 cents
I apologize for length ahead of time, I tend to be long winded, haha.
I'm an accounting major, and my passion is the markets. I honestly don't like any American stock right now that is dependent on the stability of the American consumer. Less people head to the casino to go play poker when they lost their job.
I personally see heavy inflation in the future, coupled with a severe recession. This would be stagflation, and it is not good.
Keep in mind that you are buying a share of the business, you are not buying the product that they produce. (edit)
Also, when you say that it is cheap at $4 it tells me that you need to do some learning before you plunge into the market. The selling price of a share of stock has zero to do with whether it is cheap or not. Keep in mind that you are buying a part of a business, and without profits, that business is purely speculative. Pay attention not to the share price, but the price to earnings ratio, dividend, financials, conferance calls, annual reports, etc. Pay attention to the growth the company has shown, and whether it is likely to continue. How do they make their money? You would be surprised how often you would be wrong about this with any given company.
As an example:
533.88/share as I write this
P/E (price per earnings ratio): 36.93
4.04/share as I write this
PokerTek is infinately more expensive than google, not cheaper. Google has earnings, PokerTek does not. They are losing money. Their earnings are also trending downward from 05-07. This is a common error for the lay person.
Also, looking at the balance sheet:
Current Liabilities = 4163
Current assets = 9513
* 4496 cash
* 1873 net receivables
* 2879 inventory
* 265 other current assets
Current liabilities are debts due within a year. Current assets are pretty much cash/short term investments, receivables etc. Things that can be turned into cash fairly easily, and can be used to cover current liabilities. Would it be a good idea for a company to use all of its cash to pay its debts leaving nothing for a rainy day?
Also, that is quite a bit of inventory compared to receivables. Rising inventory can sometimes make things look better than they are depending on the accounting methods used. Like first in, first out (FIFO), Last in, first out (LIFO), etc. By hiding the most recent inventory, which is probably costlier, in inventory, and using first in first out, inventory rises, which brings up assets. This can make things look better than they are. Is this the case? No idea, I'd need to dedicate a few hours to this if you wanted some better analysis.
Bad financial times often lead to excess inventory. Prices are often lowered to clear this extra. Reducing profits, and this company is already losing money.
I just looked at the cash flow statement, and it isn't pretty. Operating cash flow is the cash flow generated/(lost) from the business's ordinary operations. When a company has negative operating cash flow it means they need to rely on financing to pay their debts. You can have positive cash flow, yet be hopelessly in the red by borrowing more than you spend, which increases future debt payments and can lead to that point in Sim City 2000 where you can't raise the taxes enough, or your sims(customers) leave, and you can't borrow any more because the debt payments have become more than your cash.
This company has some cash flow problems it looks like. That is one of the bigger reasons a company becomes insolvent and goes bust. Just like Bear Sterns. They did not have the current cash to pay debts, or to give people their money bag when they headed for the exits.
This company has negative operating cash flow, and it has almost doubled to the negative side for the last 3 financial report years.
Total cash flow from financing, +12,574 in the most recent year
-meaning the borrowed 12,574 more than they paid back, increasing future payments on debt.
In my opinion, investing in this company right now would be like calling mr. nit's UTG's 1mil dollar raise into a 20k pot with 23o preflop. Ya, you could hit trips, but chances are there's a better place to risk your money.
To give you an idea of what my portfolio looks like to capitalize on the collapse of the US financial system:
proshares ultrashort financials (ticker SKF)
-this basically goes up $2, for every $1 the financials that comprise it lose.
-it is leveraged, therefore it is more volatile. higher gains when I'm right, higher losses when I'm wrong.
Shorting the dow, s&p, high p/e (relatively expensive) stocks, etc.
-This is up $4500 in a few months, although I held the short when it was in the negative, and actually shorted more because the rally was bullshit, and those in the know knew this. I don't recommend shorting either, losses are technically unlimited. You wouldn't wanna be unlucky enough to be short a stock during a short squeeze by some hedge funds.
Some put options betting on a drop in the Dow/S&P etc. I predicted 9,000 for the Dow around September as a possible bottom, we're halfway there.
-these are risky, but multiply gains exponentially when you are right
-i don't advise beginners to touch options
However, to give you an idea of what they can do. I'm a poor college kid, so I use a stock simulator for my investing. I've been doing this since I was 7/8, and I am 100% confident in my ability to use real funds, I just don't have them haha.
I bought EMC call options that expired in about a year at $30/contract betting on VMWare, a subsidiary of EMC that was going public. I thought the valuation for vmware could boost the valuation of EMC in the short term, and I also had a feeling not many people had this hypothesis. Within 3 months, my hypothesis was confirmed, and the same contracts were going for $700/share.
$30 ---> $700 (over 2200%)
Stock at the same time
$13 ---> $19 or so
basically, I'm pissed that I wasn't born 10 years earlier, and had some savings to take advantage of this with.
10k would turn into 220K+ =(
Last edited by Hisx1ncPS : 16th July 2008 at 9:24 PM.