Long term investing is the way to go, but that doesn't mean you should hold every stock forever. We really hate to see fellow investors lose their hard-earned money. Imagine if you held OncoSec Medical Incorporated (NASDAQ:ONCS) for half a decade as the share price tanked 96%. And it's not just long term holders hurting, because the stock is down 64% in the last year. Shareholders have had an even rougher run lately, with the share price down 26% in the last 90 days.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
OncoSec Medical hasn't yet reported any revenue yet, so it's as much a business idea as an actual business. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. For example, they may be hoping that OncoSec Medical comes up with a great new treatment, before it runs out of money.
We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some OncoSec Medical investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it reported in January 2019 OncoSec Medical had minimal net cash consider its expenditure: just US$21m to be specific. So if it hasn't remedied the situation already, it will almost certainly have to raise more capital soon. That probably explains why the share price is down 48% per year, over 5 years. You can see in the image below, how OncoSec Medical's cash and debt levels have changed over time (click to see the values).
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. 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. It only takes a moment for you to check whether we have identified any insider sales recently.
A Different Perspective
Investors in OncoSec Medical had a tough year, with a total loss of 64%, against a market gain of about 11%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 48% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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