Sirwin
Sirwin

Be a Stock Investor, Not a Price Hunter


Do not invest in stocks based on their prices. Today, why should you look at the company behind that stock rather than the stock price or some ridiculous technical charts? You need to look at what that company does, I will talk about it and I will explain it with very good examples. Intuitive, which has become very popular recently with the module it will land on the moon and whose stock value has increased incredibly rapidly since the beginning of the year, then Nvidia. Nvidia's prices did strange things on Friday. In one day, I will also explain why chasing prices through Rivian and Lucid is ridiculous, why you should not turn a deaf ear to social media influencers, and how you should do research. It's going to be a bit like a lecture, but I'm sorry if you get bored. But you are losing money for nothing. You are in a futile rush, and instead of living a quiet and enjoyable life and being an investor in quality companies, you exhaust yourself in fights about what the price will be on those charts and screens every day.

Let's start with our first example. Intuitive Machines claims to provide Lunar Access, that is, access to the foot. In fact, it does not carry these modules to the moon itself. He carries it to Space X. After leaving Space X, he tries to land on the moon and provide services to customers from there. What kind of services, for example, does NASA use the information from this module in its research on the moon? By the way, the exciting thing is that this company is the first private company that can land on the moon, even if it is unmanned. It sells this collected information to companies around the world.

You can sell it to NASA or, for example, you know a Colombian clothing brand. He was also a customer of this module. I think they will design new textile products that can withstand even the moon, partly for advertising purposes. That's why they wanted data. So actually this is a space transportation company. It outsources most of the transportation part to rocket companies such as Space X and our own Rocket Lab. But the module that landed on the moon belongs to him, and the great excitement was about the landing of this module on the moon this week. The module landed on the moon yesterday. Since the news of the landing of this module has been fed very enthusiastically since the beginning of the year, it caused a very enthusiastic movement in the stock market. While it was $2 at the beginning of the year, it reached $11 at its peak. It increased up to 4.5 - 5 times.

Yesterday, after the stock market closed at Intuitive, such things happened that the need for investigation arose. On February 23, it reached 14 dollars again at the peak of 5 days. The closing is $6.55. Look at the loss in one day, and all of that loss came after the stock market closed. The first module he sent to the moon landed successfully, but then something happened to him and he crashed. Frankly, I don't know why it fell over. I haven't studied its technology much. This is a pretty small thing anyway, this module fell over. Either there was a stone at the bottom, there was a problem with the weight distribution, or there was a problem with the lowering. I really have no idea. But when this was overturned, investors sent the stock down 31.7% after closing.

All this is nonsense, all this is nonsense, so what nonsense. It is also absurd that the stock of a private company that successfully landed a module on the moon for the first time has fallen 31.7%. It's ridiculous that it's 15.8% even when you get there. Influencers play a major role behind this nonsense. An account on Twitter pennystocks someone also quoted him and explains why the stock would jump 500% if yesterday's landing was successful. Because he says, "If this had been successful, the company would have grown a lot from now on. It would have been the main player in all processes up to the settlement of humans on the moon." Now, if the landing had been successful on February 23, the stock would have gone up.

But we need to look at the foundation. If the stock was going up, it would mean that the company would sell more stock. How do I know? Let's take a look at the financial statements right away. The company's current value is $892 million. But this is probably the value before the closing on February 23. From there it has gone down another 31%. When we look at the financial statements, there is a gross loss of 13 million dollars. In other words, it spends 26 million dollars to achieve a turnover of 12.7 million dollars. There is also a loss on the main activity side. When we combine it, there is an operating loss of 23.2 million dollars.

If you examine the details, you will see that it seems like a profit was made due to some financial manipulations, interest rates, etc. But this is where I'm concerned. There is harm here. It is normal for there to be damage here. It's a newer company. So when will the land pass? Since we do not have any idea about its total profit at the moment, it is very difficult to know how much turnover it will make and how much profit it will make. For this reason, the income statement of the company in its financial statements is full of extreme uncertainty for me. In such cases, I like to immediately look at the company's cash flow. Because yes, the company may make a loss.

But if it has strong cash or cash flow is not too bad, then maybe it can survive. We see that there is a net profit of 15 million dollars in this quarter. But remember, there are a lot of incomes outside of the main activities. Despite this, when we look at it, the company actually burned cash again. 7.2 million dollars was spent on operations. He spent $7.5 million on investments. That means he spends 15 million dollars in 3 months. So how much cash does this company have on the sidelines? He has 40 million dollars. So somewhere between 6 months and 9 months he will run out of money. Moreover, if he intends to speed up his work, he may need new money for those works.

Because space is an expensive place anyway. Since the company is aware of this situation, it constantly issues shares. $2.3 million in March 2023. Again, $13.9 million in June 2023. $20 million in the last quarter. I think they will issue even more shares. What does it mean to issue shares and sell new shares? This is something that will reduce the value of the stock you hold. Because the share that that stock represents in the company is decreasing, and I think it will take a longer time to deal with this. Because they have 23 quarters worth of cash in their hands and their ship crashed on February 23.

Now, from all this, I cannot conclude whether to invest in this company or not. Because yes, the company's financial situation is not very good. But if its technology is very good, if the company has a chance to quickly land a module on the moon again despite yesterday's accident, if the reasons for yesterday's accident are clearly understood and this will not happen again, and if the company has a very good management team, all these will be solved. But since I don't know all this, I prefer not to invest in the company. Because in order to know all this, I first need to know the company deeply. For example, you should read this document.

This document describes the user manual of Intuitive Machines' first machine, the device that they tried to land on the moon but fell down, and what it can carry to space, under what conditions it can operate, etc. Moreover, this is just one of the company's products. When we look at the website, there are other products, services and services. I need to understand these. Because when I understand these, if I believe that the company can achieve this despite the accident on February 23 and earn a serious income from it, I will invest. I don't care about this stock price movement.

The first thing you need to learn is this, my experience tells me. It takes a lot of time to resolve these types of accidents. In other words, the research that the company needs to do to say that we will not experience this accident again takes 3 to 5 months. Because of this, the stock can go even lower. Whether it goes or not, I haven't done my research on the main issue that concerns me: whether it is worth investing in or not. That's why I prefer to stay away. You should stay away too.

Otherwise, you will fall into the trap of these players, these influencers, and also the option players, that is, futures gamblers, as we will now see in the Nvidia example, and your job will be very, very difficult. Now let's see what tricks the futures contract players are playing on us. In forward contracts, there is someone who writes the contract. We can basically call him the owner of the casino and his aim is to reset the value of the contract he sold to you. For example, you bet that Nvidia would rise very high, if it rises very high, you will make a lot of money in that contract.

But the person who wrote the contract will lose. In this case, if he wants the stock not to go up too much, or if you bet on the stock going down too much, in this case, if the stock goes down too much, you will win and he will lose. He doesn't want that either, and those who write the contracts are generally large investment companies, that is, the owners of the casino, as they say, the casino always wins. Now let's take a look at the price movements and these are on February 16-17, the stock is at $ 740. As you know, it has already had a very rapid rise since the beginning of the year. Then it starts to come down step by step. Meanwhile, there is new news about Nvidia.

Bank of America publishes a report and says that lead times for Nvidia microchips are shortening, implying that sales are slowing down. However, in fact, perhaps only production blockages have been resolved. That's why products are delivered faster. But does it matter to the market? Prices are being reduced downwards. There is a decline of around 10% from $740 to $660. In other words, 10% means that this stock was worth $1.7 trillion at that time, and there is a loss of $170 billion in value. So, is there any change in the company? Is there any new information flowing from the company? News from the market about artificial intelligence is generally very positive. But the reason why it is dropped here is very simple.

A lot of people are betting on the balance sheet. Some of them are betting on the good future of the balance sheet with options. If the balance sheet looks good, we will drop this stock as much as possible before the balance sheet, so that those who bought these options will give up their bets and close the options. So let them sell and here these option players are seriously falling out. I always say that if the company's value decreases as the balance sheet period approaches, this is generally good news. Because the balance sheet will probably go up. Before that, they burn the players.

Then the balance sheet came, it was way above everyone's expectations and there was a very rapid rise. When the stock market opened, the stock was at $803 and suddenly it reached another peak and went up to $820. But this is something that happens within minutes. So it's something that happens in the first 5 minutes. Since the balance sheet was good, they gave the option buyers the gas in the first minutes, thinking that this stock would continue to work. Then they started to lower it downwards. The maximum we could sit on was 600 dollars.

The incoming balance sheet is so strong that I do not think it will fall below 700 - 750 unless there is a super break in the markets. Here, they burned these option players by playing around. A lot of people lost money on these options. I didn't lose. Because I buy and hold my stock. If you have spot stocks and have a long maturity, these do not concern you. Then the main issue that concerns you is will this company continue to grow? Will the technology supported by this company find new markets? Instead of sitting and drawing lines on ridiculous graphs, you try to read basic news about the company.

Let's see what the two basic news are, one of which says that Nvidia has invested in Arm, Recursion Pharmaceuticals, SoundHound and NNAX, that is, Nano - X Imaging. Now what does this mean? The company sees such things in the long term that it invests in areas supported by artificial intelligence. Arm is interesting, Arm is also considered his rival. So, he has new collaborations in mind with Arm. But Recursion Pharmaceuticals, for example, is trying to speed up drug development processes with artificial intelligence.

Nano x Imaging is trying to produce cheaper x-ray devices supported by artificial intelligence and sell them in poorer countries. Thus, it tries to improve the quality of the results obtained from x-ray. It also reduces its cost. Sound Hound was honestly not a company I followed. But since Nvidia has invested, I will follow it. What am I reading here? This company sees areas where artificial intelligence chips will be used. It is currently investing in those areas as well.

For example, imagine how much faster drug production processes would be if Recursion Pharmaceuticals were successful. Drug design and drug discovery processes are super expensive and long processes. With artificial intelligence, this can come to a completely different place. I'm interested in this. I am interested in this news. Because this news shows me that Nvidia has a long way to go. Another news that I recommend you to follow is a Twitter account called The AI Investor.

He also said that Nvidia, along with other big partners like Microsoft, Jeff Bezos, the owner of Amazon, Amazon itself, very big groups such as Intel, LG, Samsung, and even Open AI are among the investors, together they started a robot company. He says he is investing. Figure AI is a company trying to make humanoid robots, just like Tesla, and we read here that it received an investment of $ 675 million with a valuation of $ 2 billion. Now why does this concern me so much? In microchips, we are currently only talking about what Open AI will do with it.

So we are talking mostly about mental functions. However, products such as Tesla's humanoid robot and this humanoid robot show that these artificial intelligence chips can also be used in robot construction. This could pave the way for a great revolution. Because there are thousands of jobs in the world that require physical labor, and these big players, including Nvidia, are investing here. What does it mean. Nvidia still has a long way to go. It means we're at the very beginning of the more accessible total market, and it also tells us that Tesla needs to get some action.

Because your competitors are not standing empty-handed. Now, as an Nvidia investor, what do I see here? My company is moving into new areas of growth. These ridiculous movements of the stock price are none of my business. Can we give back some of the super earnings we have received since the beginning of the year? It may be possible, but this is not something that will always go on like this. But it doesn't matter because my company is a good company.

Look, I'm not saying intuitive is a bad company. What it's trying to do is great, but it's not a good company yet. Because cash flow is negative. The cash on hand is not enough. It is unclear whether the work will be successful. You are playing a bit of a gambling game there. I have that too. Don't get caught up in our investments and the movement of the stock price. Nvidia is a very good company, it has a super profit margin, and it also believes that there will be new areas on the artificial intelligence side. It invests here and paves the way for us. Think about where the successes in the pharmaceutical industry or the robotics industry will take artificial intelligence. So are you really interested in this ridiculous price movement? so obviously these are weird trades of day traders. They interest me zero.

Another interesting example is Rivian. Regarding Rivian, I have been saying for a long time that electric car startups should be avoided, except for Tesla. Because Tesla is not a startup. Tesla is a company with positive cash flow and net profit. It is the only company that makes a profit in electric car production. Rivian is a company that produces very nice vehicles, but it makes a loss. Rivian's current vehicles are basically pickup trucks called R1T and R1S. These are very expensive vehicles, that is, vehicles worth 60 - 70 - 80000 dollars. The market for these is very small everywhere in the world.

If you are going to sell electric cars and play in a wide market, you need to be able to reduce your price. These are not vehicles. That's why Rivian is also making preparations. They will launch a new vehicle called R2. It will come in March on March 7th. If the prices of this vehicle are very good, this may benefit Rivian stock. Technically speaking, I also think that Rivian stock may have a trading opportunity around $10. But I became an investor in Rivian. I was very lucky. I sold more or less at the peak. I sold the stock for around $25. It rose another 1-2 dollars after me, and then it has been falling ever since.

Why did I invest at that time? Because I thought the balance sheet would be good and I thought it would have a positive impact on Rivian's future. I really made the investment, but then why did I sell it? Because I generally do not sell companies that bring good balance sheets. Here's why I sold it. Because I thought the balance sheet wasn't that good. So, I wasn't as excited as Wall Street was, and I saw that it would take longer than expected for this company to make a profit and generate positive cash flow, and I understood that it would take a long time to release this cheap R2 vehicle, scale it, and sell it. For these reasons, I decided to leave this company.

I basically don't like investing in car companies anyway. If you ask about Tesla, I do not invest in Tesla because it is an automobile company. If I were to invest in an automobile company in the world, my choice would not be Tesla, it would be Porsche, it would be Ferrari. Because they have very high profit margins. They have very strong brands. Regardless of their car, someone might want to buy a Porsche, a Ferrari, or I would invest in a Toyota. In other words, it is the company that does this job best. I invest in Tesla because of its autonomous driving and robotics technology. Rivian does not have such technology.

In this case, Rivian turns into a simple car company in my eyes. They can be very good tools. In fact, if I'm not mistaken, the only company that can compete with Tesla in the upper segment is America. Rivian's sales exceed Tesla's Model S and Model X combined. They like the vehicles. Pick up is also nice. Not everyone will be a cybertruck customer. I accept these, but this is a car company and it is incredible that this car company cannot make money from car sales right now because it started its business later than Tesla.

On the electric car side, we do not know what the price of the new R2 model will be, under the pressure from China and Tesla. But at that price, it probably won't make money again. Because this company is making a lot of losses. Let's see, the loss turnover is 1 billion 315 million. As of December 2023, last year's turnover is 663 million. There is a nice doubling, but this year the increase has stopped. In fact, we see this in all electric car manufacturers, including Tesla. But the difference with Tesla is that there is gross profit in Tesla, but not here. There is a gross loss of $306 million.

We were happy that there was some improvement in gross loss. But it has started to get worse again. It has a loss of 1.581 billion in main activity. He can't fix it either. When I invested, I believed that the main operating loss could improve during the period when it decreased. But then I realized that things would not go as well as I expected. I was out of feeling. There is a loss of 1.5 billion dollars from main activities. When we look at the cash flow, it spends 1 billion dollars from activities, it spends 600 million dollars on investments, it borrowed 1,710 dollars to find 1 billion 800 dollars. It was one of the issues that had already made the stock move badly. Again, he borrowed here and borrowed there.

My guess is it will have to continue borrowing or issuing new shares. Because it burns a total of $1.7 billion in cash. When we look at how much cash he has, he has 9,368 cash. So he has 4 to 5 quarters worth of cash and will ramp up a new model with this cash. So he will build the facility for him. As you know, at first, losses are incurred just like Tesla is currently experiencing with Cyber Truck. It will show them and so on. Now Rivian is a nice company, its cars are nice, but it is an automobile company. I don't like investing in a car company anyway. I think the stock is technically cheap right now. From here it turns upwards. But I wouldn't be an investor because it's a car company.

I don't like investing in car companies anyway. If I did this I would be considering another company. They do not have autonomous driving, they do not have robots, they do not have all these technologies and the company does not have cash, cash will not be enough. This company will have to issue shares again or perhaps be sold in the future. That's why I stay away. It's that simple. The stock is technically not in a bad place, but I would never be an investor and as someone who believes in long-term investment, I think I'll stay away from Rivian.

In a final example, Lucid. Lucid is a very cool company. First of all, when I look at Lucid's summary chart, Lucid is valued at $7 billion. Now look, if it's Lucid 7, I think Rivian is free. Lucid is not worth $7 billion. Because this company's financials are beyond terrible. Turnover is 157 million dollars. The same turnover has been going since September 2022. It even goes backwards. Gross loss is 252 million dollars. There is almost no improvement. So it seems a little better than the previous quarter, but it still has a long way to go. When you look at the main operating loss of 736 million dollars, there is no improvement.

There is no investment in this company. This is not a very new company, it has been on the market for a long time, it has been traded for a long time. In response, for example, they gave their CEO a ridiculous amount of money and bonuses, and the company said that it did not foresee a serious sales increase for the next year. Moreover, their vehicles are extremely expensive. It's fallen into the same trap that Rivian fell into. It needs huge investment to scale. He cooperates with the Arabs. He is trying to produce cars in Saudi Arabia. If money comes from there, that's great.

Its cash is 3 billion 859. Its cash flow was $475 million spent on operations this quarter. So its cash can be considered relatively strong. In the meantime, he went and issued stocks or bonds again. It improved the cash flow a bit. But it's still a cash-burning company. If I'm not mistaken, they have a loss of around $300,000 per car they sell. I think someone even had a funny joke on Twitter. Instead of trying to produce cars, this company should buy a Model S and a Model There was such interesting data.

If we look at Lucid's price movement, its value has fallen by around 70% since Lucid went public. I can't say the stock is expensive, but it could get cheaper. Because this company needs an incredible amount of investment to make a profit. Those investments will follow the stock in the future. The manager of this company has no interest in making a profit. He has put a lot of money in his pocket. He has zero motivation. I don't know why one should become a Lucid investor.

Yes, I tried to explain it with four examples. The stock price does not matter, the technique does not matter, we must love the company. If we believe in the company very much, how can we believe in the company by looking at its financial statements, looking at its technology, looking at its future? If you really understand all of this and have spent 10 to 15 hours researching a company, if you have learned a lot about that company from people like me and other professionals, if you have read the company's reports, and if you have a strong opinion on what the experts say, invest.

But what do you care about technique and graphics? They are temporary things. What ultimately matters is whether the company will generate free cash flow, whether it will be profitable, and whether it will continue to grow. In this context, my investing style is simpler. I only invest in companies that I believe will grow. I constantly observe on the road whether they are growing or not. If there is a development that will hinder growth, I may change my decision.

For example, I decided to quit Google as of this week. Maybe I'm wrong. The stock may be going up, but Google is poorly managed, and as some of you may have been following this week, they had a lot of trouble again with the launch of Gemini AI, their own artificial intelligence platform. I will not be a partner in poorly managed companies. It's that simple. I will invest in companies that are well managed and have high growth potential. We will see what the stock price is anyway.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.

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