I sat up and took notice when the Angle (LSE: AGL) share price recently took off.
On 4 January, the price trebled. It’s since fallen back a bit, but we’re still looking at a 65% gain so far in 2024.
What do I do when I see a small-cap growth stock hitting the headlines like this? A few key things. First, I step back a bit and look at the bigger picture.
Ups and downs
I see Angle stock has been a lot higher in the past.
But that often happens with new growth stocks. Many times, I’ve seen false starts, and volatility in the early days. And it can happen multiple times.
But then, something comes good, and we see a sustained bull run.
Of course, telling the difference between early bubbles and the start of long-term growth can be tricky.
What’s happened
Next thing, what just happened to trigger the latest surge? A news release headlined: Breakthrough clinical results is the answer.
It talks about “combined DNA next generation sequencing of CTCs and ctDNA…“. Got that? And understand all about CTCs and ctDNA? No, me neither.
At this point I feel ace investor Warren Buffett tapping on my shoulder. And I imagine his words whispered in my ear: “Careful, young Alan, don’t buy something if you don’t understand it.”
That’s been a key to his success, and has seen his Berkshire Hathaway investing company achieve an average return of 20% per year since 1965. That’s stunning.
Need to understand?
But if I never bought any stock unless I understood every last detail of a company, I’d never buy anything.
So, we each need to get a feel for how much we need to know. And that will vary, depending on our own view of risk, among other things.
Angle does cancer biopsy diagnosis. It seems it has a new technique here and that it’s achieving some success with it.
How much more do I need to know? Should I be able to do DNA sequencing in my kitchen? Or just grasp how prevalent cancer is in modern society and get a feel for the odds of potential riches for a firm that can help do something about it?
Show me the cash
That’s a personal choice. But there’s one question I think every investor should ask, and then think very carefully about the answer.
Where will the cash come from?
Forceasts don’t show any profit yet. Will these latest developments have an effect on that?
At the halfway stage, Angle had cash and equivalents of £22.2m on the books, with tax credits to come. Is that enough to see it through to profits without needing more cash?
Is there a chance the firm might be bought out by one of the big operators, should the apparent promise of its technology come good?
Questions, 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 have my eyes peeled for Angle’s full-year results, that’s for sure.
