08 April 2015

So What? Is it Worth Buying a Stock with a Lot of Cash?

ValueEdge had an interesting post on the The Art of So What?

I recall an encounter once where my boss was running through a proposal with his boss. His boss then said, "So?" After providing a response, he was again asked, "So?" And this went on for five more times. It wasn't asked in a malicious way. It was a matter of fact, trying to dig deeper into the subject. Finally, having dug in five levels deep, he then went on to analyse the issue strategically. Fascinating to say the least.

Sometime back, I came across an analyst report about a stock. It said that the cash and equivalent that a company had was greater than the market value of the company (i.e. number of shares x price of the shares). And so it came up with a target price for the company. I bought into the idea.

The company in question was however not doing well. Its business was bleeding. The cash that was talked about soon disappeared as its operating expenses sucked away all the cash. Within a few months, it had lost half its value, and the cash was gone.

I should have asked "So?" a few more times.

Lesson learnt: It's the business that matters.


B said...

This is pretty similar to the pyramid of 5 whys that ultimately lead to the bottom of the issue. Allow us to look at things much deeper than what they appear on the surface. Good stuff.

Lizardo said...


Thanks for your remarks.

la papillion said...

Hi lizardo,

So what about the business did u learn?

Lizardo said...

la papillion,

So what indeed! Hah.