Hi Sean! I'm interested in testing my knowledge of the principles you have taught by offering up a stock that I would like your viewpoint on. Gamestop (GME) has been pummeled relentlessly for four years now. It has a very low P/E and EV/EBITDA. It has a high dividend (more than 9%) with a reasonable payout ratio (44%). Debt to market cap is a little higher than we'd like (just over 50%), and the price downtrend is still clearly in place. However, the MACD has been trending up (though weakly) during that time. If we saw a large selling spike, followed by a break of the downtrend, would that be the type of opportunity we would be looking for?

Those things are true. My biggest problem with Game Stop is that it doesn't have as much cash as I'd like to see it have. It has enough cash for its size, but not enough to weather a prolonged recession or prolonged shift in their market/niche. So it would carry more risk than our typical position. It is likely towards the end of its C wave in its a-b-c downtrend. And it has quite a bit of support in the $11-$13ish area. Seeing weekly net selling volume of around 60 million would be great. But even still, I'm more comfortable with more cash on the books than what they carry.

Thanks for your participation on this site.

Thanks Sean! How do you gauge how much cash is enough? Is there a certain cash to debt ratio or something that you look for?


Generally speaking, I only invest in companies that are worth many billions in market cap and so they need to have at least $1 billion or more in cash. Really huge companies need much more than that. But if you could say what is the most important fundamental metric (if I could only pick one) it would be cash. Why? When you're out of cash, you're done. The deeper your pockets are, the better you survive tough times and live to see brighter days.

Thank you! I absolutely love this forum and your teaching.


You're welcome. I'm glad you love it. Thanks. Help me to spread the word.