With this current investment environment, there are still some stocks with negative enterprise values. Enterprise value is market cap = total debt - excess cash. I’m currently looking at QLTI, FACT, TRID, TSCM.
He is an article on negative enterprise value. http://www.covestor.com/mbr/jjun0366/blog/29812. The returns has been impressive. I think negative enterprise value stocks give investors a margin of safety, especially when a firm has a lot of cash.
Disclaimer: I am long TRID.
Hi there,
I had a question regarding your reasoning to keep TRID. I myself once owned TRID at 1.40/share and sold it when it went up to about 1.99/share last summer when it was a net net. Presumably the stock’s NNWC was 2.50/share at the time. Here was my reasoning for not considering TRID as a long term investment:
1. Inconsistent Retained Earnings. Net income is unstable changing from positive to negative. It appears the company cannot seem to have a competitive edge within the market.
2. Since 2004 it stopped purchasing its own shares and since then has steadily sold shares to increase it’s cash on hand. This will has caused the value of the stock to decrease.
3. The 10-year free cash flow is unstable being positive in some years and then negative.
Overall, I can’t see how this company can be profitable in the future with it’s historical trend. I believe it is selling stocks to continue business which in the long run will hurt the value of the company if this company doesn’t have to track record to be successful.
If there is something I am not seeing from your perspective, I would appreciate your opinion.
Thank you.
-SHM