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I sat up and realized when the Angle (LSE:AGL) share price took off recently.
On January 4, the price tripled. It has since pulled back a bit, but we are still expecting a 65% gain so far in 2024.
What do I do when I see a small-cap growth stock making headlines like this? Some key things. First, I step back a bit and look at the bigger picture.
Ups and downs
I see Angle's stock has been much higher in the past.
But that often happens with new growth stocks. Many times I have seen false starts and volatility in the early days. And it can happen several times.
But then something goes right and we see a sustained bull run.
Of course, differentiating between early bubbles and the start of long-term growth can be difficult.
What happened
Next, what happened to trigger the latest surge? A press release titled: Breakthrough clinical results is the answer.
Talk about “Combined next-generation DNA sequencing of CTC and ctDNA…“. I have it? And understand everything about CTCs and ctDNA? No, me neither.
At this point I feel like investor Warren Buffett is tapping me on the shoulder. And I imagine his words whispered in my ear: “Be careful young Alan, don't buy something if you don't understand it..”
That has been the key to his success and he has seen his Berkshire Hathaway An investment company has achieved an average return of 20% annually since 1965. That's amazing.
Do you need to understand?
But if you never bought stocks unless you understood every last detail of a company, you would never buy anything.
Therefore, each of us needs to have an idea of how much we need to know. And that will vary, depending on our own view of risk, among other things.
Angle makes the cancer biopsy diagnosis. It seems like he has a new technique here and that he is achieving some success with it.
How much more do I need to know? Should I be able to perform DNA sequencing in my kitchen? Or simply understand the prevalence of cancer in modern society and have an idea of the likelihood of potential wealth for a company that can help do something about it?
show me the cash
That's a personal choice. But there is one question that I think every investor should ask themselves and then think very carefully about the answer.
Where will the cash come from?
Forceeasts are not showing any benefits yet. Will these latest events have any effect on this?
At the halfway mark, Angle had cash and equivalents of £22.2m on its books, with tax credits to come. Is that enough to make a profit without needing more cash?
Is there a possibility that the company could be bought by one of the big operators, should the apparent promise of its technology be fulfilled?
Questions and answers
I don't know the answers to these questions. But they're the kind of things I ask about any new growth stock prospect that crosses my radar.
I'll be keeping an eye on Angle's year-round results, that's for sure.
