The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Atara Biotherapeutics, Inc. (NASDAQ:ATRA) share price has flown 122% in the last three years. Most would be happy with that. It’s down 3.7% in the last seven days.
Atara Biotherapeutics didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Atara Biotherapeutics comes up with a great new treatment, before it runs out of money.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Of course, if you time it right, high risk investments like this can really pay off, as Atara Biotherapeutics investors might know.
When it last reported its balance sheet in December 2018, Atara Biotherapeutics had net cash of US$257m. While that’s nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. Given the share price has increased by a solid 30% per year, over 3 years, its fair to say investors remain excited about the future, despite the potential need for cash. The image belows shows how Atara Biotherapeutics’s balance sheet has changed over time; if you want to see the precise values, simply click on the image.
Of course, the truth is that it is hard to value companies without much revenue or profit. Given that situation, many of the best investors like to check if insiders have been buying shares. If they are buying a significant amount of shares, that’s certainly a good thing. Luckily we are in a position to provide you with this free chart of insider buying (and selling).
A Different Perspective
Over the last year, Atara Biotherapeutics shareholders took a loss of 17%. In contrast the market gained about 0.9%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 30% per year over three years. Sometimes when a good quality long term winner has a weak period, it’s turns out to be an opportunity, but you really need to be sure that the quality is there. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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