For us, stock picking is in large part the hunt for the truly magnificent stocks. Mistakes are inevitable, but a single top stock pick can cover any losses, and so much more. For example, the Garibaldi Resources Corp. (CVE:GGI) share price is up a whopping 1000% in the last three years, a handsome return for long term holders. In the last week the share price is up 1.0%.
We love happy stories like this one. The company should be really proud of that performance!
Garibaldi Resources hasn’t yet reported any revenue yet, so it’s as much a business idea as a business. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Garibaldi Resources finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Garibaldi Resources investors might know.
Garibaldi Resources had net cash of just CA$13m when it last reported (October 2018). So if it hasn’t remedied the situation already, it will almost certainly have to raise more capital soon. Given how low on cash the it got, investors must really like its potential for the share price to be up 122% per year, over 3 years. You can click on the image below to see (in greater detail) how Garibaldi Resources’s cash and debt levels have changed over time.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. It’s usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
Investors in Garibaldi Resources had a tough year, with a total loss of 67%, against a market gain of about 3.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 39%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
Garibaldi Resources is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.