A possible Net Net stock – but not for Me
Posted on | November 9, 2009 | No Comments
I want to highlight an investment idea that Jae over at Old School Value posted: Insmed Inc. (INSM). I decided rather than ignore investment ideas that I don’t buy into, I would mention them and let you the reader decide if it interests you. Check out his evaluation here of INSM. He makes a good case for the stock. Some of you may want to invest in it. Jae is a very smart guy who has had lots of good advice, you could do worse than follow his lead. Because it is a penny stock it would be an interesting choice for someone who has a small amounts of money to invest
But I am not going to invest in INSM and here is why.
When I do my initial valuation of INSM it comes out in the range of $.71-$.96/share. I have not dug in like Jae has done and modified numbers based on the 10Q. That is just my range based on the latest numbers. Let’s say the higher number is more accurate for me once I do a deeper evaluation. I still wouldn’t buy it even though it closed at $.81/share today. Yes INSM is a Net Net stock in that scenario, but there is a good reason not to invest in it for me and that is Margin of Safety. For me the difference between the current price and my expected value of the company does not include my minimum margin of safety of about 33%. So I pass on it. That does not mean you should. It doesn’t mean that Jae at Old School Value should. It means, even though he and I are very similar investors, we use different parameters to judge whether or not to invest. For me, this looks like a better deal than a lot of other stocks right now, but not great enough for me to put my money into it.
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