04/02/2012: GARY ON NATIONALLY SYNDICATED INVESTORS EDGE RADIO BROADCAST
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https://archives.warpradio.com/btr/InvestorsEdge/040218.mp3
JUST LETTING YOU KNOW
These 5 Rules Keep Me Out of Trouble
Before Groupon went public, they had some accounting issues. They had to change the way they do accounting. There is another issue in which Groupon pays the retailers much slower than other companies like LivingSocial. So when I first talked to you about Groupon on my radio show, I basically told you to watch out and be careful.
Number one, the valuations they were bringing these companies out at were a joke. Groupon still has a $10 billion market cap with $1.3 billion in revenues and they lose money.
On this past Friday, they announced some accounting issues. Now, I’m not going spend time going through it because I’m not an accountant. Groupon stock was down 3.10 to 15.28. So the market cap was a lot bigger before today. I’m just letting you know that I won’t play stocks like this. I have absolutely no interest in playing companies that have no controls. What I mean by that is that “accounting” is a control. It’s something they need to do better. And even though they were called on the carpet a few times…here we go again.
So we have a $20 IPO in a strong market. It opened up at 26 and went to 30. It’s now 15 and change. They better get their act together. I don’t like the fact that they came out with the news on a Friday afternoon after the close. It tells me they’re playing the Wall Street game. But here’s my other part of the equation that I explained to you many months ago.
I get those daily deals and there isn’t anything I’m interested in. I’m sure there are other people who are. But I’m just kind of wondering how long this is going to last. I’m just not so sure how big this is going to be longer term.
So, you decide. As I’ve told you there are certain things I will not touch:
- Companies that lose money
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Biotechs that have no revenues and a “possible” drug down the road
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Whenever a CFO is leaving for unknown reasons
- Accounting issues
- I don’t like touching stocks under $10 to $12 because they’re usually there for a reason….with some exceptions where I will.
These rules keep my out of trouble as much as possible.
Markets are not easy. But you don’t make them tougher by buying over-the-top speculations. Trust is a big part of the market. And Groupon is on their way to losing a lot of trust. And once it’s lost, it’s very tough to earn it back.
The Market
Very good day today in the market. That’s all I can tell you.
I know it’s been reported that there are a bunch of distribution days in the market and I understand that. But the markets keep going into new high ground. I am seeing new leadership. So basically, I’m going to call it “no sweat.”
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Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.