lundi 22 avril 2019

Knight Therapeutics: A pure speculation play

Have you heard about the fight between the actual management of Knight Therapeutics (GUD.TO) and another guy from Israel who wants to run the company?

I've heard a bit about it. But I haven't studied the issue. 

Knight is runned by Jonathan Goodman, who was the CEO of Paladin some years ago. I made a lot of money with Paladin but that reason is not enough to want to be associated with Goodman in everything he does. 

For a few years now, almost nothing happened with Knight. The stock was and still is mainly a pile of money. Wether you like it or not, that's a case of speculation. Speculation is to hope that something will happen with a stock. When you buy Constellation Software, you know the company has large revenues, large benefits, huge ROE. When you buy Knight Therapeutics, all you know is that the company has a lot of money. That's it. You don't know what they will do with the money. 

The company had 717 million dollars in short term assets on december 31st 2018 and the current valuation of the company is 1 billion dollars. The stock is selling exactly at book value, which is a s price you usually pay for a stock that's going right into an iceberg. I don't think it's the case here. 

I don't see how the stock could drop more than that. Actually, it's probably a good price to buy at this level. But it's purely speculation. 

It's intelligent speculation, I believe. 

3 commentaires:

  1. I have been considering Knight as a place to park my cash with possibilities of making some gain in the future. Yeah. It is a smart speculation for sure.

    I have none though.

  2. The problem with Goodman is he's never going to find a place for 717 million dollars. This is a guy who gets on the phone and asks for the Canadian distribution rights to some little known drug in exchange for an interest free loan or some stock options. He might do well starting with a really small amount of capital. He's playing a very different game now.
    The bigger concern for the penetrators of the world is whether MTY is heading in the same direction. MTY could buy casa grecque (or some other small restaurant chain) and take it from 20 to 40 locations or put it in every mall in Canada. But now MTY goes out and buys a franchise with over 1,300 locations in America with declining same store sales. That's a much harder game to play and win at. You have to know when the game has changed for your favourite stock or company.

  3. Its a good buy right here long-term because all the business has to do is put cash to work in even a mediocre product(s) and the stock jumps to $10 then onwards and upwards from there. Goodman's thinking is to me frankly stubborn, arrogant and bizarre.