Why I won't 'gamble' in Creative stock

Over the past few days, we've seen Creative shares (SGX: C76) rocket from $1 to $9+, and drop back down to $7+. To those employees of Creative, better sell now while you can. To those who managed to catch this crazy 8x increase, congratulations!

Being in my 30's, my investment strategy is to accumulate excellent companies and below average prices. The reason why Creative's shares have appreciated so much is due to the introduction of their "Super X-Fi" technology, details can be found at their website here. In short, they claim users who attach their dongle to any pair of existing headphones can experience a full surround sound. MSRP at USD150.

On their operating profit, Creative in the 2Q ended December posted a net loss of US$4.2 million, narrowing from its US$6.5 million loss a year ago. Seems to me they are betting the house on the success of this SXFi technology and the share punters seem to follow suit.

I'd adopt a wait and see approach, and reassess when the 2018 interim results are released to verify that this SXFi sales pick up. Otherwise, there are other more suitable counters for me to invest my funds in.

Key things that I will watch for:
1) Will this quality of sound differ if i used a crappy pair of earphones vs a high end pair? I enjoy good sound, and i spend alot on my headphones. This will be the true test!

2) Can they successfully launch the product by mid-2018? and not do a Elon musk promise.

Otherwise, gone are the days of stock punting. Having a steady stream of income for financial freedom is what I'm aiming for.

Comments

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