You Should Care Only About Stock Performance, Not Revenue Growth
Posted by Timothy Sykes on Sun 16th of Dec, 2007 11:25:28 AM
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Since I’m about to start writing for AOL’s BloggingStocks.com, I’ve started reading some of the articles posted there. I’m not surprised to see a whole bunch of BullShip! Take for example this interview with IncrediMail’s (Nasdaq: MAIL) CEO. I won’t go into the details(because that’d give off the impression I actually care about this pathetic little company)—instead, let’s focus on this one quote:
“…Profitability will come. As I said, our focus is on revenue growth…”
OK, I understand, you’re trying to build a long-term business, you gotta invest in R&D, make deals that take time to ramp, etc, etc, but c’mon—profitability will come—that’s messed up! Is it any wonder your stock is right at a 52-week low, even as revenues are growing in excess of 75%? Is it any wonder that if I had a longer time horizon, I’d be much more likely to short this stock rather than buy it?
There are two lessons here: one for corporate management and one for investors.
TIM Lesson for Corporate Management: Hey, idiots, when you’re a publicly traded company, your long term vision, short-term profit sacrifice blah blah doesn’t matter! You build your business into a profitable machine, so your shareholders will be happy and won’t get rid of you.
TIM Lessons for Investors: Never buy into any company’s story, buy into a stock’s performance. When you buy into a stock and it doesn’t perform, you get out—there’s plenty of other stocks out there that are performing NOW.
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TIM Trades
View All| Date | Stock | Buy | Sell | Net |
|---|---|---|---|---|
| July 2 | KIRK | $10.60 | $11.53 | $1377 |
| June 30 | ISRL | $107.97 | $118 | $985 |
| June 24 | LZB | $4.53 | $4.81 | $1240 |
| June 17 | GWSC | $1.86 | $2.76 | $2679 |
| June 15 | SHZ | $1.66 | $1.83 | $280 |
| June 15 | SPNG | $0.11 | $0.18 | $630 |
| June 12 | JAZZ | $2.84 | $3.26 | $380 |
| June 12 | MAPP | $9.68 | $10.07 | $565 |
| June 8 | HEB | $3.00 | $4.18 | $334 |
| June 3 | GROW | $8.64 | $8.96 | $740 |
| June 3 | SYMX | $1.21 | $1.11 | $940 |
| June 1 | USCN | $0.55 | $0.86 | $260 |
Total: $65,674 (421%)
After this interview and my blog post came out, MAIL announced Google has kicked them off AdSense and the stock tanked to under $3. Google then reinstated them–probly as a result of a lot of begging and/or a change in ad policy–but the stock is still at $3.70. NEVER BUY INTO DOWNTRENDING STOCKS, NO MATTER WHAT THE CEO OR ANYBODY ELSE SAYS