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As an investor, mistakes are inevitable. But you want to avoid the really big losses like the plague. So consider, for a moment, the misfortune of Resolve Ventures Inc. (CVE:RSV) investors who have held the stock for three years as it declined a whopping 95%. That would certainly shake our confidence in the decision to own the stock. And over the last year the share price fell 33%, so we doubt many shareholders are delighted. Furthermore, it's down 35% in about a quarter. That's not much fun for holders.
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.
Resolve Ventures hasn't yet reported any revenue, so it's as much a business idea as an actual business. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Resolve Ventures finds some valuable resources, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered 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 companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Some Resolve Ventures investors have already had a taste of the bitterness stocks like this can leave in the mouth.
Resolve Ventures had liabilities exceeding cash by CA$206,685 when it last reported in February 2019, according to our data. That makes it extremely high risk, in our view. But with the share price diving 62% per year, over 3 years, it's probably fair to say that some shareholders no longer believe the company will succeed. You can click on the image below to see (in greater detail) how Resolve Ventures's cash levels have changed over time. You can see in the image below, how Resolve Ventures's cash 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 Resolve Ventures had a tough year, with a total loss of 33%, against a market gain of about 0.6%. 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. However, the loss over the last year isn't as bad as the 41% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
Resolve Ventures is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.