IAG – What do you think?
As we know, this stock has been taking some serious beatings and I have been messaged and asked (on a few occasions), “Is it worth to just cut my losses and bail out? (excuse the pun), or hold it?”
Obviously, that is a personal choice and it depends on a few factors.
1, What percentage of your funds have you risked?
2, At what level did you buy in at?
3, Do you have enough funds to keep trading or have you put in so much that this is stopping other trades?
4, Do you believe that this will pick up, and if so, what is your time frame for this?
Ok, there is a bit more to it than just the 4 questions listed above, but if you have answered these, then you probably already know your stance on this stock if you are already bought into it..
They are all important questions but number 4 means that if you think it will pick up in a few years, then your funds could be tied up for quite a long time. I am not suggesting one sells out at a loss as some may have bought in during a peak and just seen a big dip and recouping that sort of money by selling out and working on other stocks, could be tough ask.
If you are thinking of hanging in there for a while so as to minimise loss (and this isn’t always a bad call, depending on your circumstances), there are a few things to take into consideration.
1, We know the IAG traded between 411 – 669 between November 2014 until March 2020. This is a good 5 and half year’s consolidation period.
2, We know that its short-term assets won’t cover its short-term liabilities, but the long-term assets will cover its long-term liabilities.
*Note* – It is usually recommended that the short-term assets cover both short term and long-term liabilities, and in this case it doesn’t, so still a bit of a gamble on that.
3, The stock is around 70% undervalued, which could make good profit, IF they can ride out the current pandemic as this is currently what is killing it.
*Note* – How do we know that it is the pandemic?
The share price was consolidating close to its top yearly range and then after Jan 20th, started its downward trajectory. From Jan 20th 2020 at 670, and then March 16th 2020 at 219.. To beginning of August this year at around 157.
That said, it does seem to be testing a new support at around 155, so it may still drop more if it breaks below that… (just something to bear in mind)
Of course, if one was to speculate, a drop below 155 and if a vaccine is found and brought out, then there is plenty of room for this to climb. “If’s” and “possibilities” are not the best way to try to read shares and a simpler technique would be to monitor better trending stocks, especially stocks that are riding through this pandemic and still returning a good profit… AND THE GOOD NEWS IS THAT THERE ARE ACTUALLY QUITE A FEW STOCKS OUT THERE STILL RIDING A GOOD PROFIT, once you know the techniques involved in how to find them … (and believe it or not, yes, there are techniques to doing this)
Ok, I admit that I do like to also add Asset to Liabilities within my analysis, though if one is following a trend, then that is not needed, and it is just me being the overly data-fussy person I am