In my experience (and that is apparently a lot less than some of the recent posters on this thread), stocks that continue to be priced for perfection, very rarely obtain it.
Just saying.....
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In my experience (and that is apparently a lot less than some of the recent posters on this thread), stocks that continue to be priced for perfection, very rarely obtain it.
Just saying.....
I don't understand why people who's gained a lot of money from Xero would get out completely. Its SP certainly looks like it has a lot of potential, regardless of whether it's based on hype or not.
The whole point of investing is to take some risks for some gain. If you have made money from Xero, why not take your capital back (plus interest if you borrowed), plus some more to spend, and leave the rest. Those are "free" shares. You would only be risking what you didn't have if you didn't invest. Since you invested, got your money back, and some more, it shouldn't matter losing what you didn't have. You've already made gains on your initial investment.
There's no guarantees in investments, for most investors, not losing money is a pretty good result, far too many people don't buy shares because of the fear of losing money, so the "risk" of losing what you made should not be a big deal, but the "risk" can also result in big gains.
This is my investment strategy anyway. "Risk free" investments are the best!
Apologies for my ignorance.
Do we have an example of a SaaS company that's gone up dramatically since IPO and subsequently went out of business? Or that the share price has tumbled by say more than 50% and hasn't recovered?
I base mine on forward looking value of revenue and growth, but with a healthy dose of risk in XRO's case because it is going up against some serious incumbents. While they currently have the edge in both methodology, design and customer satisfaction, it may not remain that way over the course of the next 3-4 years, which is where I put the current SP at. Current value = $8.20, if they maintain 100% customer growth overall (i.e. not just 100% in the USA). They only get to the current SP 3-4 years down the track on my valuation, which means they have to maintain that customer growth for that long.... I really really really hope they can do it as it would be fabulous for NZ, both as a lot of shareholders are based here and also because it would be awesome for our economy (and I could end up working for them as an IT guy!). But that represents a lot of risk.
You admit that the price represents a future price and don't see any risk in that? That is the definition of not sticking to fundamentals.
I would NOT trust Credit Suisse's valuation as the number of times they (and other big finance/brokerage outfits) have been completely wrong on valuations is rather high. And I believe that they are incorrect BY DESIGN, i.e. I think that brokerage firms that release public reports on values are the biggest pump and dumpers in the industry. Why would you release a report that indicates a higher than current price, when you could make a lot of money by picking the shares up at a lower price and awaiting the price to get where you think it will go? Frankly it does not make sense to me... if I see an undervalued share I do one of two things: I buy it and sometimes out of altruism will share valuations with others. Or, if I am feeling greedy, I won't tell anyone about it and just keep picking them up at a lower price. I wonder... are international finance companies likely to exhibit altruism or greed? DYOR - always and never rely on someone else to tell you what a price should be (as anyone that has been to an Asian/African market will tell you!).
It depends on your life as well, when I got out of XRO I was going through some life changing circumstances that meant I had to have money on hand and I also had to decrease the riskiness of my assets. While, looking back on it, I didn't actually need to get rid of all of my shares and probably shouldn't have, I don't regret it because if I had to make the same decisions based on the same evidence, I would make the same choice. As I still made a lot of money, I can't be upset about it!
I like your investment strategy and it is also mine. Hence I like to invest more in things that are actually giving a return now and are looking positive for the future also, giving both dividends and the chance for capital growth.
How many examples do you want? In my view you should not think of SaaS companies being dramatically different and therefore worth more than normal companies. Everyone did EXACTLY the same thing in 1999 just before the great .com crash. While they may have a scale advantage which could (in theory) gain them more customers for lower cost than traditional businesses, in my view market forces will always take over (i.e. competition) which will reduce the advantage of said scale. This also from an IT guy that understands how the SaaS business works at a detailed level :) What that means for XRO is that while they maybe best of breed etc currently, eventual profit figures from the market if everyone switches to them, will likely be in line with or lower than Intuits. As technology marches on, it tends to make services cheaper along with productivity gains, not returning more profits to the companies producing them, unless they exhibit monopolistic behaviour or influence the market (I am looking at Microsoft, Apple and Google to some degree). Those 3 previous companies have either had a tightly held competitive edge, IP that they can protect or really good marketing. I don't see XRO having any of these, hence my advice - be cautious.