[Summary]
Zombie company is a term used to describe a company whose lifespan is extended due to weak profits and cash flow.
When it comes to zombie companies, it becomes easier to see the difference between situations where it can be used and situations where it is difficult to use when it is replaced with an actual example.
In actual investment, the starting point is to check dependence on low interest rates and borrowing burden. However, it is important to note that just because the stock price is low, it is easy to view it as undervalued.
In this article, we will organize zombie companies not as "knowledge" but as steps to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
What to distinguish when it comes to zombie companies
When looking at zombie companies, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. Zombie companies are not the only basis for making decisions. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Thinking about zombie companies as an example
If we look at zombie companies as an example, we first have a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
Checking the following points will make things a lot easier.
| Axis to check | Things to see in zombie companies |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
Zombie companies don't just stumble when they lack knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Focus on one situation where zombie companies work well
- Even if the price movements are similar, if the background is different, they are treated as different things.
- View not only successes but also failures using the same criteria.
- Check if you can reproduce it with your own amount of funds
The important thing here is not to settle on just one zombie company as the correct answer. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before making a decision on a zombie company, check at least these five things.
- Can you explain in one sentence the purpose of looking at zombie companies?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking for zombie companies is not to act faster, but to reduce unnecessary errors in judgment.
Summary
Zombie companies are food for organizing investment decisions. Even if you read it as an example, your judgment will be inaccurate if you treat it as a standalone buy/sell signal.
The points to keep in mind are as follows.
- Decide first the purpose of looking at zombie companies
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat zombie companies as a tool to pause before buying or selling, rather than as a word that forces you to make a hasty decision.