Is GPRO a buy?

One of my members asked me what I thought about GPRO. He also wrote in his email that he has losses associated with this stock. Should he hold the stock or should he sell? Since there’s two parts in his question, let’s answer the first part and give you my opinion on GRPO. Please don't forget to read the disclaimer at the bottom of this page, because this post is only my opinion and not an investment advice.

This chart shows that the best accumulation period was between the end of June and the beginning of September 2014. The second accumulation phase started in the middle of January 2015. I tried to fit a probabilistic distribution to the ratio of the S&P500 over GRPO, and the result is interesting.

The blue line is the ratio experimental cumulative distributive function and the red line is the fit. As of today, the expected value for GRPO is 1/35 of the S&P500. That means a fair price today would be about $58.

The problem and at the same time the advantage with GRPO is it’s unpredictability. This stock could go to 0 or skyrocket, who knows. That’s why it’s important to use proper money management with it.

In the end, GPRO is not interesting in my opinion. It’s not even necessary for me to dig deeper from what I see. I would consider doing a deeper analysis if it was selling for 40$ or less as of today, which would represent a probability of approximately 0.97 to bounce back up according to my probabilistic model.

What can you do if you already bought it at a “high” price?

First of, you should never have a big loss with any stock. Always use proper money management by setting stop losses or buying put options. But let’s say you didn’t have a stop loss and that you’re now sitting with a big loss. What do you do? Every case is unique, so I can't tell you what to do, but I can tell you what I would try to do to improve the situation.

First, I would reevaluate the stock and put a stop loss immediately. With a big loss already, I would not want it to grow bigger, and bigger, and bigger. Second, if I'd think the stock is currently undervalued I would buy more shares to lower the average price of my position.

Don’t forget, losses (as gains) are only real when you sell. Therefore, it is important you don’t make the fundamental error of buying high and selling low.