The lunacy of chasing stocks at 100 times sales

I Sany price too high to pay for a sizzling stock? The denizens of Wall Street Bets, a hot-stock group on the internet, might say no. They’re wrong. Price still matters, no matter how sexy a stock’s concept.

My favorite example of stock market lunacy is chasing stocks that sell for 100 times revenue. For 16 years, I’ve put together a warning list of some stocks selling at that rarified height.

The average stock on my warning list has fallen almost 26 percent in 12 months. In 16 columns on this subject, I’ve discussed 73 stocks. If you bought one of them, you had a 71 percent chance of losing money and an 85 percent chance of doing worse than the S&P 500.

Here are some new warnings.

Virgin Galactic

Would you pay $250,000 to become a passenger in outer space? Virgin Galactic Holdings Inc. (SPCE), founded by Sir Richard Branson, hopes you would. But if not, no worries: Justin Bieber, Leonardo DiCaprio and some 600 other people have already signed up.

The trouble is, everything is on the come. So far there have been only test flights. The stock fetches 4,600 times sales.

Nine analysts follow Virgin Galactic, and eight call it a “buy.” But my research suggests that unanimous or near-unanimous buy ratings often precede disappointing performance.

Workhorse Group

Want a fleet of electric-powered trucks and a monitoring system to track them? Workhorse Group, based in Loveland, Ohio, would like to accommodate you. It is also working on electric- powered delivery drones.

Pretty cool stuff, you say? Investors agree, and the price/revenue ratio is 5,170.

Fans figure that Workhorse has a good shot at a contract to upgrade the U.S. Postal Service fleet of mail delivery trucks.

If I had to bet on who will win this contract, I’d put my money on the team of Oshkosh Corp. and Ford Motor Co.

Marathon Patent

Based in Las Vegas, Marathon Patent Group mines digital assets, in other words, cryptocurrency. It has posted losses every year from 2012 to the present, but the losses have narrowed lately. Last month, Marathon Patent bought $150 million in bitcoin, making it a cryptocurrency owner as well as miner. The stock goes for 260 times revenue.

Blink Charging

From Miami Beach, Florida, comes Blink Charming Co. (BLNK), which owns and operates charging stations for electric vehicles. The company has posted losses each year since 2009, but the losses have narrowed recently.

Blink shares go for 321 times revenue. My main objection: I just don’t see the barriers to entry. I can well imagine the oil companies adding electric-vehicle charging stations to their gas stations.

Moderna

I’m grateful to Moderna Inc. (MRNA) for developing one of the two COVID-19 vaccines now in widespread use in the U.S.

But I wouldn’t buy the stock at 287 times revenue. If Moderna grows as analysts expect, the stock is reasonably priced.

Will a competing vaccine emerge that requires less refrigeration or fewer doses? Will variants of the virus defy the vaccine, sending scientists scurrying back to the drawing board? Those are some of the many questions.