Debt of a Stock

Let me first start out by saying I'm totally new to the stock market. I was told by a co-worker that a certain stock might be a good buy. I looked into it, as the year before it was at $30 a share then at the time it was at $1.30. I decided to buy 400 shares for around $500 I believe. The stock since then has rocketed to $20 a share to my surprise.

While looking into the stock I found out it has high debt. My question is how can a stock that supposedly has over 1 billion in debt (so I've read) still have it's price per share go up? Also from what I've read everyone agrees it's a horrible stock but yet over the last 6 months its went from $1 to $20. What so bad about it?

Debt is not necessarily a bad thing. Others can correct me but as I understand it the key is that the assets should be greater than the debt and the cash flow needs to be greater than the current short term liabilities. Otherwise they won't be able to meet their short term obligations.

Certain institutions run high debt as a part of their normal operations. Banks specialize in debt for instance.

BTW, there's a saying that goes: Bulls make money. Bears make money. Hogs get slaughtered!

If you've pulled in a great profit on a stock, and it's doing well at this time, take some profit. I'd take at least half off the table now.

Looking at that stock, analyst estimates are suggesting negative growth for the next several quarters. Since the market is forward thinking I'd keep an eye on it. If it drops below19 sell the other half and get out. find another stock to ride up. Maybe a tech like Cisco or maybe an energy stock like Chevron. You might even want to gamble on Citi (C).

you shittin me?!

wow - what a ride dude. you wont get a run like that again.

its quite easy.....in the case of high debt stock during the recent crisis. the fear was, that they wouldn't be able to "roll over" their debt...that's basically what happened to GM. everybody was afraid to lend to risky credits. so, the stock "priced in" a bankruptcy.....which, subsequently they avoided....

so, you have a situation where, in the span of a few months the stock priced in bankruptcy, to now, a "growth" company.

debt is merely a tool. if you take on a lot of debt to fund a capital investment that can throw off free cash flow above and beyond the servicing required by the debt.....you can take on as much debt as the cash flow allows...

seriously, sell 100 shares tomorrow. youre up what? 3100?....how much further can you expect this to go? or, buy some put options 6 months out to protect that gain.......please!

Thanks for your information guys I appreciate it. Also are stop limit orders the best way of protecting a profit when selling a stock like this?

yeah, thats fine. - say if it breaks below X you'll sell it there or 5 or 10 cents down - whatever.

but, youve got 400 shares. you're not gonna move the market with a market order

you could sell as it declines with stops