Some stocks are best avoided. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding Oxbridge Re Holdings Limited (NASDAQ:OXBR) during the five years that saw its share price drop a whopping 85%. We also note that the stock has performed poorly over the last year, with the share price down 21%. The falls have accelerated recently, with the share price down 35% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
We don't think Oxbridge Re Holdings's revenue of US$841,000 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). Investors will be hoping that Oxbridge Re Holdings can make progress and gain better traction for the business, before it runs low on cash.
We think companies that have neither significant revenues nor profits are pretty high risk. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Oxbridge Re Holdings has already given some investors a taste of the bitter losses that high risk investing can cause.
Oxbridge Re Holdings has plenty of cash in the bank, with cash in excess of all liabilities sitting at US$1.5m, when it last reported (March 2020). This gives management the flexibility to drive business growth, without worrying too much about cash reserves. But since the share price has dropped 32% per year, over 5 years , it seems like the market might have been over-excited previously. The image below shows how Oxbridge Re Holdings's balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Oxbridge Re Holdings's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Oxbridge Re Holdings's TSR of was a loss of 81% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Oxbridge Re Holdings shareholders are down 21% for the year, but the market itself is up 7.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 29% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 4 warning signs for Oxbridge Re Holdings (3 are significant!) that you should be aware of before investing here.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.