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Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held Westminster Resources Ltd. (CVE:WMR) for five whole years - as the share price tanked 99%. We also note that the stock has performed poorly over the last year, with the share price down 71%. Furthermore, it's down 36% in about a quarter. That's not much fun for holders.
While a drop like that is definitely a body blow, money isn't as important as health and happiness.
See our latest analysis for Westminster Resources
Westminster Resources hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Westminster Resources will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered 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. Some Westminster Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Westminster Resources had liabilities exceeding cash by CA$695,325 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -63% per year, over 5 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Westminster Resources's cash levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. What if insiders are ditching the stock hand over fist? It would bother me, that's for sure. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
Investors in Westminster Resources had a tough year, with a total loss of 71%, against a market gain of about 2.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 63% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.