Q: Good Day Team,
I am down 50% on LSPD at an average cost of 51CAD/share.
I figure if LSPD is sold today even at $30CAD/share, I would lose about 40% of the original investment which is about 2.25% of the total portfolio.
I can average down with enough funds to break even if the company is sold at $30 CAD. My hesitation is what if the company is NOT sold. I am sure the price will halve from where it is now. I am pretty sure you would hold and would suggest not to throw good money after bad.
Yet, I would like to ask for a high risk investor, would this be too risky a move?
Thanks as always!
I am down 50% on LSPD at an average cost of 51CAD/share.
I figure if LSPD is sold today even at $30CAD/share, I would lose about 40% of the original investment which is about 2.25% of the total portfolio.
I can average down with enough funds to break even if the company is sold at $30 CAD. My hesitation is what if the company is NOT sold. I am sure the price will halve from where it is now. I am pretty sure you would hold and would suggest not to throw good money after bad.
Yet, I would like to ask for a high risk investor, would this be too risky a move?
Thanks as always!
5i Research Answer:
LSPD has seen decent momentum in the past few months, and analyst estimates have largely been moving higher. Its valuation has improved over the years, trading at 14X forward sales in FY2019 to now 2.4X forward sales. Its margins have improved, but it is still not profitable and it does not generate positive free cash flow. The stock looks to be bottoming, but we would prefer not to average down or buy at these levels. We would prefer to see management continue to execute on improving profitability before considering averaging down.
Overall, we would be OK holding here, and would prefer to deploy cash elsewhere in the markets where momentum is stronger and cash flows are positive.