Mar 18 2009
If You Don’t Do Careful Research, This Stock Woud Get Dismissed
This morning, while researching various stocks to see if there were any that I could recommend in good conscience, I came across one that make me laugh out loud. Star Scientific (STSI) came up under the “Tobacco” category as I was looking for anything to say, “Grab.” I was analyzing all industries to look for a sign of hope.
Enter Star Scientific, an absolutely upside down company that falls into the tobacco category because it helps people quit smoking. It isn’t that sales are up, or revenues are better. No, for reasons unknown to me, the stock has just taken off. It is up 215% since last July.
I searched the financial data, looked not only at the P/E ratio, but also the ten year financial data. This company was losing money, had a negative earnings, and insider trading was non existent. On one website, there was nothing in the current news reports that indicated any upcoming mergers.
Even a careful analyzer like me can skip over something as crucial as news reports on a different website. While my brokerage had nothing listed, Morningstar had all the information I needed. The stock has been zipping upwards because the Supreme Court denied RJ Reynold’s lawsuit against this company for patent infringement. The thought is that now the company profits are going to turn around.
But there is some concern here. The net profit is in the red. Though we can understand that lawyer’s fees can ravage a company, why isn’t the company profitable? It’s been reporting revenue for ten years, but the past several years, there has been nothing but losses.
This company merits further research, and there probably are articles in print or on the internet about this company. If you wish to pursue buying a company that is currently not profitable, I suggest you do additional research.
The point is, do careful research. Even people like me who particular about researching can make the mistake of overlooking data. It comes from doing research a long time, and not looking at the most comprehensive data available. It also comes from doing this so long that a person like me can get sloppy.
