Saturday, September 12, 2015
Stocks Selling Below Cash per Share and Debt Free: Guaranteed Way to Profit
So what does it mean that a stock sells below cash per share? First, assuming the company has no debt, you take the amount of cash that the company has in the bank and divide it by the outstanding number of shares. That represents the cash per share. If a stock is trading for less than that amount, it is a bargain, because if the company went out of business immediately, everything would be liquidated and disbursed on a per share basis. Even if all the company's equipment and real estate were worth nothing, all that cash would provide the investor with a profit.
Once a stock sells for below cash per share, it starts to attract t6he attention of hedge funds, analysts, and companies looking for a takeover candidate, all of which can drive the price of a stock up. You may be wondering, do such stocks really currently exist? The answer is 'Yes' and here are a few of them.
Avalanche Biotechnologies, Inc. (AAVL) is develops gene therapies for the treatment of ophthalmic diseases based on its Ocular BioFactory platform. The stock closed on Friday at 10.64 per share, yet the stock has 13.09 in cash per share, almost a 19% discount. Or another way to look at it would be if the stock price reached its cash price, it would rise by 23%. Latest quarterly revenues for the company rose by 50.4% year over year. The company is currently debt free. Of course, with biotech companies, or any type of company for that matter, there is a risk that management may burn through a lot of cash quickly.
BroadVision (BVSN) makes and sells enterprise portal applications. It is debt free with cash per share of 7.25, yet is is trading for 6.00 per share, a 17% discount. Quarterly revenues were down 30.8%.
Ambassadors Group (EPAX) is a Spokane, Washington company which markets worldwide educational travel programs for students. The stock is at 2.70 and the cash per share is a healthy 4.14, a discount of 35%. The company has no debt. Revenues were down 10% for the latest quarter, but the company generated a profit for the latest quarter after two quarters of losses.
Gencor Industries (GENC) is another stock below cash. It makes and markets heavy machinery. The stock is at 9.15, whereas cash per share is 10.19,
As you can see, there are several of these diamonds in the rough. But do your research before investing, as most of these have very low market caps and limited trading which reduces liquidity. If you like interested stock lists like this, you should check out many of the free stock lists at WallStreetNewsNetwork.com.
Disclosure: Author didn't own any of the above at the time the article was published.