that's some of the dumbest advice you can get.
I love movies...and I love going to the movies for as cheaply as possible. Therefore, I LOVE Movie Pass. Movie Pass is a program owned and run by Helios and Matheson (HMNY) that allows you to see a movie per day for a meager $9.95 per month.
I see a number of movies per month and I pay for others to go as well (such as my wife and son). Therefore, if I could cap my monthly movie-watching expenses...I'm in! And actually, I got mine and my wife's Movie Pass membership when they ran a special for $7.95 per month. If I watched one movie per month, I was already saving money. So for me, it was a no-brainer.
Yet, according to the "buy what you love" Wall Street adage, I should own the stock. However, it's the dumbest reason I know of to buy a stock. If I love a product or service, I should buy that. But it doesn't mean I should buy shares in the company. Why? Sometimes the company itself isn't worth buying.
For instance, Helios and Matheson acquired Movie Pass in August of 2017 and slashed the monthly price big-time. Well, because of that, their subscriber base blossomed from 20,000 subscribers to over 3 million subscribers.
Many on Wall Street would say to "buy what's popular" because its growing in both public sentiment and in numbers. However, asyou can see from their stock chart below, the growth in subscribers hasn't helped the stock. Why?
Because you don't buy what's popular and you don't buy what you love. You buy the stock of a company that's making money and that's expected to make money in the future.
Well, right now, we can take a look at HMNY's fundamentals and see that's not happening right now.
For starters, they're a measly $47 million company. Because they're so small, it would be easy for a larger competitor to take them out. Instead, the larger competitors (in this instance) are just waiting for them to burn-out...burn through all of their cash, that is).
As you can see, they've only got around $42 million in cash, which to me or you would be a lot of money. But since this company has to pay full price for every ticket, yet only charge their subscriber base $9.995 per month, they're losing money hand over fist. As one guy put it, they're giving away dollars for quarters.
Imagine if I see five movies throughout the month and the ticket price is $10 (which most of them are more costly than that). I'd be benefiting from $50 worth of movie tickets yet it only cost the regular subscriber $9.95 per month (and it only cost me $7.95 per month). So they're losing money every time someone goes to the movie.
Now...they've got a plan to make money through other ways, in this particular business model...or so they say. Time will tell if they can make that work or if they fall flat on their faces.
But right now, it's worth it for me to buy the Movie Pass membership because I'm seeing far more movies per month than I'm every really having to pay for. So it was worth it for me to buy their product/service. Yet it's not worth it to buy their stock because they don't have a P/E because they have no "E"..earnings.
They have no profit margins, because they're losing money. They lost almost $150 million last year and they're burning through cash at a super-fast clip.
Can they survive? Maybe. If they get more rounds of funding and have enough time to play out for their "business model" to work. But do I want to gamble on that and place my money into it when I could take the same money and buy a company that's presently making money and is expected to make more money in the future?
So that's why I don't "buy what I love", "buy what I know", "buy what I use", "buy what's popular", etc. They're all very dumb reasons for buying a company. After all, if you had the money to buy a profitable company outright or an unprofitable company outright...which are you going to buy? Of course, the profitable one. Wise stock investors think the same way. The wise ones aren't gamblers.
Therefore, "buying what you love" should only apply to a product or service but not the company's stock that provides that product or service.
Movie Pass may not be in business next year. If not, then a saw a ton of movies for a fraction of the price. And because I love seeing movies so cheaply, I hope they survive so that I can continue to use the service. But I'm not buying the stock because it's a pure speculation/gamble if they make it and turn the company around or not. And I'm not a gambler but rather an investor. Therefore, I'll continue to be a Movie Pass member, but I'm not buying HMNY's stock. But the "buy what you love" club likely bought this stock at $15-$30 and it now sits at a mere $0.19 per share!
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