Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Reabold Resources Plc (LON:RBD) for half a decade as the share price tanked 85%. And it's not just long term holders hurting, because the stock is down 58% in the last year. Furthermore, it's down 64% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 32% in the same timeframe.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
See our latest analysis for Reabold Resources
We don't think Reabold Resources's revenue of UK£584,000 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). For example, they may be hoping that Reabold Resources finds fossil fuels with an exploration program, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. We can see that they needed to raise more capital, and took that step recently despite the fact that it would have been dilutive to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Reabold Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Reabold Resources only just had cash in excess of all liabilities when it last reported. So it is a good thing that the company has looked to remedy the situation by raising more capital recently. With that in mind, you can imagine there may be other factors that caused the share price to drop 31% per year, over 5 years. The image below shows how Reabold Resources's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
We regret to report that Reabold Resources shareholders are down 58% for the year. Unfortunately, that's worse than the broader market decline of 23%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 31% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Reabold Resources has 5 warning signs (and 3 which are concerning) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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March 23, 2020 at 09:08PM
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Easy Come, Easy Go: How Reabold Resources (LON:RBD) Shareholders Got Unlucky And Saw 85% Of Their Cash Evaporate - Yahoo Finance
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