The news about the Hawkeye-1 well sends the share price of Trans-Asia-Petroleum (TAPET) down to 2.77 pesos per share as of this writing. That’s almost a 75% drop since the news broke out.
I looked at the company’s valuations and I saw negative EPS and Net Income for the past 4 years. With those figures, the company is definitely not the ideal one that I will invest in for the long-term.
I also saw some traders on the forums who are now experiencing large paper losses and are being taken aback by their emotions. I call these traders as high risk speculators or “gamblers.” These “gamblers” speculate on stocks hoping to win big if the stock goes in their favor.
So why do people resort to gambling in the stock market?
People who resort to gambling in the stock market doesn’t have the patience to buy and hold good equities that requires years or even decades to realize its full potential. Those that are not patient enough to wait are often the ones who resort to speculative gambling. If the stock goes along with them, they win but if not, they lose. In the case of TAPET, if the company finds oil in the Hawkeye-1 drill, the speculators win. If not, they lose. Unfortunately, the latter happened. So what would these high risk traders do now with this worthless stock? They usually do 2 things; It’s either they “buy down deep” to pull down their average price or worse, cut their losses and move on to other speculative stocks.
Speculative trading is a very high risk strategy. It involves the right skill and craftsmanship to do. It involves timing and accurately predicting when to enter and exit the market. It takes years to practice and requires dedication to do. You could literally get rich overnight with this strategy or lose all if the market goes against you. If you are still learning the basics of the stock market and you decide to begin with this strategy, It will surely cost you a lot of money. Unless you are willing to lose big to gain bigger returns, then this strategy is for you.
So what’s a better strategy for those that’s just starting out?
My strategy involves long-term investing. I rarely look at charts. If I look at them, I only look for buy and sell signals. That’s it. Also, I only like companies with strong fundamentals. Companies with predictable earnings and sustainable growth. If you advocate a long-term investing strategy, then you would know that patience is the determining factor to be successful. Pick those value and growth stocks and wait for the market to realize its true value.
Happy investing!