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Investing in stocks inevitably means buying into some companies that perform poorly. But long term Asante Gold Corporation (CNSX:ASE) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 65% drop in the share price over that period. Furthermore, it's down 31% in about a quarter. That's not much fun for holders.
Check out our latest analysis for Asante Gold
Asante Gold didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Asante Gold finds some valuable resources, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). It certainly is a dangerous place to invest, as Asante Gold investors might realise.
Asante Gold had liabilities exceeding cash by CA$2,886,098 when it last reported in October 2018, according to our data. That makes it extremely high risk, in our view. But since the share price has dived -30% per year, over 3 years, it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Asante Gold's cash levels have changed over time (click to see the values).
Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? 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
While the broader market gained around 2.5% in the last year, Asante Gold shareholders lost 10.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.1% 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. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.