Would a pullback in prices of the massive U.S. A.I. companies affect ENGH's price? I understand that investors are questioning the high valuations of companies like Nividia.
Could a pullback in the A.I. industry valuations create buying opportunities for ENGH?
I am hesistating to sell ENGH at this point because it is profitable, has a good balance sheet, and the dividend is still attractive. But, if management continues to stay on the sidelines for investing its cash for much longer, I am concerned that the stock price will continue to fall.
Despite its low valuation, a tech pullback would likely negatively impact the share price, though the impact might be muted versus some of the high-flyers. Cash is now nearly a third of the market cap, and it continues to generate more cash. With its decline, it could get hit with year-end selling even without a tech correction. It has become a value trap. Investors do not care, and something needs to change for them to pay attention. IF the company were to spend some money on growth initiatives, we think this would help. However, considering how long it has held 'too much' cash, we do not think this is something to count on. We think it is an OK, lower-risk sector name that has now transitioned into an income stock. But if one is not focused on income, we do not think it needs to be owned. It is now a small cap, and this may also limit new investor interest, especially if there is a correction.
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