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We believe that share price
should be irrelevant in determining the acceptability of an investment.
For that matter, whether a stock is listed on an exchange or trades “over
the counter” is not what is really important, what matters is whether
it is a worthwhile investment. Walker’s Manual does not discriminate
between unlisted and listed stocks—no matter which exchange(s) they do
or do not call home, to us they are worthy of coverage if they have a
real business with real assets that provide an investor some margin of
safety.
Past performance has shown that the small investor’s chief advantage is investing in small cap value companies. These companies tend to be too small for Wall Street to cover. These companies are too small to make a meaningful difference for a billion dollar portfolio. But they are just the right size to make a difference in the small investor’s portfolio. The result is that small stocks are often available for purchase by enterprising investors at more attractive valuations than larger stocks. Our bottom line is that as criteria
go, stock price and whether or not a stock is listed are not good indicators
of a prospective investment's desirability. The label of micro-cap stock
or penny stock is one of a number of flags, nothing more, reminding us
of the importance of understanding a company's valuation before you trade
in its stock. It's too bad that we aren't also reminded of the same principal
when dealing with higher-priced stocks. On the one hand, there is no fundamental
reason to avoid micro-cap stocks or unlisted stocks in general. Investors
simply must learn about any investment they are making—or accept the consequences
of investing with blind faith as their advisor. |