Speculative Stock Portfolio

[aus_trader]

I buy a few speculative stocks every now and then with money I can afford to lose, so smallest parcels of around $500 each per stock. '...with money I can afford to lose' is very misleading as it sound like I have excess that I don't know what to do with ! Quite the opposite is true, I am an average Aussie battler and the money I put into these stocks is any free cash that I have after priorities are taken care of. Priorities are having sufficient funds for: mortgage, utility bills, car expenses, entire amount for monthly credit card balance (not the minimum repayment!), and living expenses (food/clothes etc). Once the basic priorities are taken care of, I have a few thousand in a cash account for emergencies or for a holiday. Then I have money put into longer term stocks with some funds usually kept for new stock positions with a longer term horizon. With any remaining cash, I will buy speculative stocks mentioned in this thread. These include mining hopefuls, new technology startups and turnaround stories of companies trying to recover from near collapse. I have not been including these in my "Medium/Longer Term Stock Portfolio" as these tiny speculative stocks have wild swings such as 50% up or down days and once in a while one of these can go into administration and I will lose the entire stake in that stock, that's a 100% loss on that investment. So I didn't want that level of volatility in a longer term portfolio, hence the birth of this new thread "Speculative Stock Portfolio".

Although it's not common, I have had a few of them that went into bankruptcy either due to poor decision making (such as paying a huge amount for almost a worthless asset), racking up massive debts or running out of money and not being able to raise more capital. In these instances I have lost the amount put into that stock, usually around $500.

Two full paragraphs about Risks buying speculative stocks and depressive text about losing the entire investment in a stock. Usually speculative stock threads start with the biggest hype and excitement with predictions of the next tiny-cap stock that's shooting to the stars from what I've seen in forums. But with decade long experience and having survived through the GFC, I want to be realistic with the risk I'm taking with each speculative purchase.

So why put any money into these penny stocks anyway? Well, given the risk I'm taking, the story has to be big with each pick with potential to return multiple times the initial stake.

So the first stock for this portfolio is a new technology stock involved in using technology to cleanup environmental problems. These problems include air pollution, mining and chemical issues. Company is "Clean TeQ Holdings Limited (CLQ)" bought on 7th of July for 70.5c, a quantity of 750 shares.

 

[tech/a]

I've traded spec stocks for over 20 years.
My only must is liquidity.
100%+ gains are more frequent in shorter time
Frames
I never take a trade prepared to lose the lot.

Watching with interest

 

[ReXXar]

I buy a few speculative stocks every now and then with money I can afford to lose, so smallest parcels of around $500 each per stock. '...with money I can afford to lose' is very misleading as it sound like I have excess that I don't know what to do with ! Quite the opposite is true, I am an average Aussie battler and the money I put into these stocks is any free cash that I have after priorities are taken care of. Priorities are having sufficient funds for: mortgage, utility bills, car expenses, entire amount for monthly credit card balance (not the minimum repayment!), and living expenses (food/clothes etc). Once the basic priorities are taken care of, I have a few thousand in a cash account for emergencies or for a holiday. Then I have money put into longer term stocks with some funds usually kept for new stock positions with a longer term horizon. With any remaining cash, I will buy speculative stocks mentioned in this thread. These include mining hopefuls, new technology startups and turnaround stories of companies trying to recover from near collapse. I have not been including these in my "Medium/Longer Term Stock Portfolio" as these tiny speculative stocks have wild swings such as 50% up or down days and once in a while one of these can go into administration and I will lose the entire stake in that stock, that's a 100% loss on that investment. So I didn't want that level of volatility in a longer term portfolio, hence the birth of this new thread "Speculative Stock Portfolio".

Although it's not common, I have had a few of them that went into bankruptcy either due to poor decision making (such as paying a huge amount for almost a worthless asset), racking up massive debts or running out of money and not being able to raise more capital. In these instances I have lost the amount put into that stock, usually around $500.

Two full paragraphs about Risks buying speculative stocks and depressive text about losing the entire investment in a stock. Usually speculative stock threads start with the biggest hype and excitement with predictions of the next tiny-cap stock that's shooting to the stars from what I've seen in forums. But with decade long experience and having survived through the GFC, I want to be realistic with the risk I'm taking with each speculative purchase.

So why put any money into these penny stocks anyway? Well, given the risk I'm taking, the story has to be big with each pick with potential to return multiple times the initial stake.

So the first stock for this portfolio is a new technology stock involved in using technology to cleanup environmental problems. These problems include air pollution, mining and chemical issues. Company is "Clean TeQ Holdings Limited (CLQ)" bought on 7th of July for 70.5c, a quantity of 750 shares.

Maybe I shouldn't be but I do feel concerned when you say you put all your free cash into "speculative stocks". If you take care of the downside the upside will take care of itself. So let me ask you, what made you choose CLQ?? I cannot overstate the damage you do to your portfolio when you permanently lose your capital, $500 invested in an index fund and averaged 10% return over 10 years becomes $1300. Please bear this in mind. In the long-term the index should average something similar if you can stand the volatility. And with only a few thousand dollars in your bank, if you need to raise money quickly for emergency for small caps often you will be forced to sell in an illiquid market at terrible price (if there's buyers at all).

 

[aus_trader]

I never take a trade prepared to lose the lot.

With more years in the market than myself I will take your comments on board Tech/A. I will look at implementing some sort of stop loss strategy for the stocks like CLQ which has better liquidity and price is higher. My dilemma is when it comes to a say 0.8c stock with little liquidity with the nearest buyer at 0.6c! Can't see how I can implement a stop loss strategy in this case...

 

[aus_trader]

And with only a few thousand dollars in your bank, if you need to raise money quickly for emergency for small caps often you will be forced to sell in an illiquid market at terrible price (if there's buyers at all).

I do agree with you here ReXXar, it will be hard to get out at my desired price. The reason for buying CLQ is for it's potential to become something bigger if it's technology can be used for more applications or grow via winning more customers.

 

[Boggo]

With more years in the market than myself I will take your comments on board Tech/A. I will look at implementing some sort of stop loss strategy for the stocks like CLQ which has better liquidity and price is higher. My dilemma is when it comes to a say 0.8c stock with little liquidity with the nearest buyer at 0.6c! Can't see how I can implement a stop loss strategy in this case...

and that is why you don't buy that stock !

 

[tech/a]

With more years in the market than myself I will take your comments on board Tech/A. I will look at implementing some sort of stop loss strategy for the stocks like CLQ which has better liquidity and price is higher. My dilemma is when it comes to a say 0.8c stock with little liquidity with the nearest buyer at 0.6c! Can't see how I can implement a stop loss strategy in this case...

Boggo beat me to it.

Rule 1 liquidity
Rule 2 see rule 1

 

[Cam019]

The reason for buying CLQ is for it's potential to become something bigger if it's technology can be used for more applications or grow via winning more customers.

I'm a little confused @aus_trader. Is there any sort of analysis, be it fundamental or technical, happening before you pick a stock for this portfolio or are you just randomly picking stocks that you think will go up? I understand that this is a speculative portfolio but if the answer is the latter, I think you may be in for some trouble unless you get lucky.

 

[aus_trader]

and that is why you don't buy that stock !

I am open to suggestions and flexible to change my strategy along the way. So thank you Boggo and tech/A for your comments.

So rather than deciding not to touch any of the stocks in the "Penny Dreadful" space and closing down this thread, I will make changes to see if something positive can come out of this as I go along. So after giving some thought about all of your comments, I have reviewed some of the stocks that I have bought in the past that fits this "Speculative Stock" space. And I am coming to the realisation that it would be better to go for the higher priced / more liquid stocks even in this small cap space. So going forward I will make the following changes to this portfolio:

• If there are two or more stocks that I've come across that presents me with a compelling story good enough to include in this portfolio, I will go for the higher priced stock. For example let's say I come across two stocks a promising biotech and a junior mining hopeful. I don't care which one I buy as they both present with a good potential for upside based on my own research and opinion. One stock is 2c and other stock is 20c. What do I do? In the past my thinking was 2c stock could have more upside so I may buy that instead of the 20c stock. To explain further, my limiting belief was that the 20c stock may double to 40c, what if the 2c stock got to 40c! That's 20 times the original stake. Anyway from today onward, I will let go of that limiting belief and buy the 20c stock without hesitation in this situation, as ReXXar mentioned "If you take care of the downside the upside will take care of itself". So if I take care of the downside by not buying the 2c stock with no liquidity to get out even at 1c, I may still have a chance to get out of the 20c stock with enough liquidity at 15c if the story changes or if I get tired of holding the stock that is not realising it's potential. Who is to say that the 20c stock cannot ever get to say $2 , a cool upside.
  
  
• Although each stock is different, I will look at getting out of stocks that are going down or not going anywhere for a prolonged period of time. So it's not an exact stop loss method but a loose capital preservation method that can be deployed with higher priced / more liquid stocks.

So with the above in mind, I will be limited with opportunities to add to this speculative portfolio therefore allowing me to increase my savings as pointed out by ReXXar. The extra savings will be used to grow my emergency cash buffer and for adding funds to my ""Medium/Longer Term Stock Portfolio". By the way love the name "ReXXar" as it takes me back to the good old days playing Warcraft III .

 

[ReXXar]

I am open to suggestions and flexible to change my strategy along the way. So thank you Boggo and tech/A for your comments.

So rather than deciding not to touch any of the stocks in the "Penny Dreadful" space and closing down this thread, I will make changes to see if something positive can come out of this as I go along. So after giving some thought about all of your comments, I have reviewed some of the stocks that I have bought in the past that fits this "Speculative Stock" space. And I am coming to the realisation that it would be better to go for the higher priced / more liquid stocks even in this small cap space. So going forward I will make the following changes to this portfolio:

• If there are two or more stocks that I've come across that presents me with a compelling story good enough to include in this portfolio, I will go for the higher priced stock. For example let's say I come across two stocks a promising biotech and a junior mining hopeful. I don't care which one I buy as they both present with a good potential for upside based on my own research and opinion. One stock is 2c and other stock is 20c. What do I do? In the past my thinking was 2c stock could have more upside so I may buy that instead of the 20c stock. To explain further, my limiting belief was that the 20c stock may double to 40c, what if the 2c stock got to 40c! That's 20 times the original stake. Anyway from today onward, I will let go of that limiting belief and buy the 20c stock without hesitation in this situation, as ReXXar mentioned "If you take care of the downside the upside will take care of itself". So if I take care of the downside by not buying the 2c stock with no liquidity to get out even at 1c, I may still have a chance to get out of the 20c stock with enough liquidity at 15c if the story changes or if I get tired of holding the stock that is not realising it's potential. Who is to say that the 20c stock cannot ever get to say $2 , a cool upside.
  
  
• Although each stock is different, I will look at getting out of stocks that are going down or not going anywhere for a prolonged period of time. So it's not an exact stop loss method but a loose capital preservation method that can be deployed with higher priced / more liquid stocks.

So with the above in mind, I will be limited with opportunities to add to this speculative portfolio therefore allowing me to increase my savings as pointed out by ReXXar. The extra savings will be used to grow my emergency cash buffer and for adding funds to my ""Medium/Longer Term Stock Portfolio". By the way love the name "ReXXar" as it takes me back to the good old days playing Warcraft III .

You're the first person who know the meaning behind the name, I managed to find a glitch in the game where I keep coming back to the same tree and powering up, God knows how many hours I did that and in the end I was literally invincible without any cheats.

Dear sir, I don't usually give personal financial advice to people I don't know, you sound like a decent guy, so PLEASE, I beg of you, sell all your stocks at once and put it in an online high interest savings account for time being and save up for a deposit for a property first. Manage downside risk has nothing to do with price. What you are doing here is nothing short of gambling, it is precisely people like you others take advantage of. I'm sure you can become a great stockpicker, but you need to develop your own system first, that will take tremendous time and effort. While you're saving up, why not develop and test your system with simulated money? The confidence you get from your system is far more worthwhile than a high return from a "speculative stock". There's a book called "The Richest Man in Babylon", you can probably download it for free, one of the principles is never invest in something you don't understand. Think about this often and heed this advice with whatever you invest in life.

Take care,

Rex

 

[aus_trader]

I'm a little confused @aus_trader. Is there any sort of analysis, be it fundamental or technical, happening before you pick a stock for this portfolio or are you just randomly picking stocks that you think will go up? I understand that this is a speculative portfolio but if the answer is the latter, I think you may be in for some trouble unless you get lucky.

I look at a lot of stocks if I can spare the time, usually in the higher priced / better established stocks. But as I flick through different stocks there are these smaller stocks that I come across. Most of them will not catch my attention but every now and then I will like the story behind it and I will investigate further. If after a lot of research and due diligence if I still see some potential in the story I may buy it.

Since you quoted CLQ, I will explain a little further. CLQ is put in this portfolio as a new tech company. It has (or in the process of developing) technologies for water treatment, air purification and resource recovery. It's at the higher priced end of the stocks that I would consider and it's bigger than some of the stocks that I have bought in the past in this speculative small cap realm. But it's not rolling in profits to pay dividends yet, hence being included in the speculative space. However the story is compelling enough for me even if I only consider one of it's three technologies: resource recovery. Given that mining is big business (especially in our OZ), companies that can improve resource recovery via new technology has a lot of potential. A lot of mines produce one type of material and a huge waste heap. Imagine being able to extract one or two other materials during processing using new technologies. So I am comfortable with keeping it in the portfolio, but as mentioned in the previous discussion I will watch it and check it's progress.

 

[Boggo]

I am open to suggestions and flexible to change my strategy along the way. So thank you Boggo and tech/A for your comments.

To explain further, my limiting belief was that the 20c stock may double to 40c, what if the 2c stock got to 40c! That's 20 times the original stake.

I have to congratulate you first of all aus_trader, you are half way there because you seem to be listening.
A lot of newcomers pop up but then disappear just as quickly when good advice gets taken as criticism.

I would guess that a lot of us on here have started off with some form of grandiose ideas but after getting hammered a few times you either give up or modify your methods.
Learning is behaviour modified by experience, capitalise on the experience of others that is being handed to you.

The bit I have highlighted in blue above, that is the mentality that people go into casinos with, doesn't work in the market aus_trader and if it does its more ass than class, think of yourself as the casino instead.

Cheers

 

[aus_trader]

You're the first person who know the meaning behind the name, I managed to find a glitch in the game where I keep coming back to the same tree and powering up, God knows how many hours I did that and in the end I was literally invincible without any cheats.

Dear sir, I don't usually give personal financial advice to people I don't know, you sound like a decent guy, so PLEASE, I beg of you, sell all your stocks at once and put it in an online high interest savings account for time being and save up for a deposit for a property first. Manage downside risk has nothing to do with price. What you are doing here is nothing short of gambling, it is precisely people like you others take advantage of. I'm sure you can become a great stockpicker, but you need to develop your own system first, that will take tremendous time and effort. While you're saving up, why not develop and test your system with simulated money? The confidence you get from your system is far more worthwhile than a high return from a "speculative stock". There's a book called "The Richest Man in Babylon", you can probably download it for free, one of the principles is never invest in something you don't understand. Think about this often and heed this advice with whatever you invest in life.

Take care,

Rex

Thanks Rex, Yes ReXXar was one of the best characters in Warcraft.

I take your comments very seriously, don't get me wrong. But each of our styles of investing/trading/gambling are different and just like you I have read dozens of books in the world of investing, trading, system development etc etc. One thing that struck me in one of the books that looked at some of the most successful investors/traders in the world was that no two investors/traders were the same. Some were fundamental, some technical, some short term and others long term. Yet each of them had their own way of doing well in the market.

Anyway, have achieved the house deposit a while ago and now just paying the mortgage. Also on the side, looking at ways to increase the returns on my share portfolio (on both longer term one and this speculative one) as high interest saving accounts pay very little interest these days. In the past have tried all sorts of systems, methods, indicators on all sorts of instruments such as stocks, Forex, indexes, commodities etc etc. I was so deep in this stuff that towards the end I was coding my own indicators, automated robots, black box systems and hosting the automated bots (robots that is) on VPS (Virtual Private Servers) all over the net such that I (my robots) would never miss a trade even if the whole country had a blackout. Sorry about the brag but chances are if there is another gizmo, I probably would have tried it out already, but it does not mean I wouldn't have a look at it. The one thing I learnt from all of this full on in-depth obsession for years and years is that all systems can work for a while if the market obeys by the rules that the system is based on. But the market is free to do what it wants!

One thing I will take from all the comments from everyone is that I will be putting very little capital into this spec portfolio than originally planned. Not only that, I will monitor the positions more vigorously once in the portfolio.

 

[aus_trader]

I have to congratulate you first of all aus_trader, you are half way there because you seem to be listening.
A lot of newcomers pop up but then disappear just as quickly when good advice gets taken as criticism.

I would guess that a lot of us that have been here for a while started off with some form of grandiose ideas but after getting hammered a few times you either give up or modify your methods.
Learning is behaviour modified by experience, capitalise on the experience of others that is being handed to you.

The bit I have highlighted in blue above, that is the mentality that people go into casinos with, doesn't work in the market aus_trader and if it does its more ass than class, think of yourself as the casino instead.

Cheers

Yes, the highlighted in blue section hardly ever happens, so it was just an exaggerated example. I have come across material relating to becoming the casino with options writing etc. Any ideas Boggo?

 

[Boggo]

Yes, the highlighted in blue section hardly ever happens, so it was just an exaggerated example. I have come across material relating to becoming the casino with options writing etc. Any ideas Boggo?

Not really. I'm pretty basic, stocks, etf's and occasionally installment warrants for a bit of leveridge or to capitalise on dividends is about my limit.

 

[ReXXar]

Thanks Rex, Yes ReXXar was one of the best characters in Warcraft.

I take your comments very seriously, don't get me wrong. But each of our styles of investing/trading/gambling are different and just like you I have read dozens of books in the world of investing, trading, system development etc etc. One thing that struck me in one of the books that looked at some of the most successful investors/traders in the world was that no two investors/traders were the same. Some were fundamental, some technical, some short term and others long term. Yet each of them had their own way of doing well in the market.

Anyway, have achieved the house deposit a while ago and now just paying the mortgage. Also on the side, looking at ways to increase the returns on my share portfolio (on both longer term one and this speculative one) as high interest saving accounts pay very little interest these days. In the past have tried all sorts of systems, methods, indicators on all sorts of instruments such as stocks, Forex, indexes, commodities etc etc. I was so deep in this stuff that towards the end I was coding my own indicators, automated robots, black box systems and hosting the automated bots (robots that is) on VPS (Virtual Private Servers) all over the net such that I (my robots) would never miss a trade even if the whole country had a blackout. Sorry about the brag but chances are if there is another gizmo, I probably would have tried it out already, but it does not mean I wouldn't have a look at it. The one thing I learnt from all of this full on in-depth obsession for years and years is that all systems can work for a while if the market obeys by the rules that the system is based on. But the market is free to do what it wants!

One thing I will take from all the comments from everyone is that I will be putting very little capital into this spec portfolio than originally planned. Not only that, I will monitor the positions more vigorously once in the portfolio.

OK, if you want to speculate, at least try to avoid companies with high debt, that way at least you will not lose entire $500. Your technical experience is valuable, combine it with your fundamental analysis and try to forget the story and more on determining a value for the company. The best way to hedge risk is to buy quality companies at cheap prices, nothing to do with liquidity or price. Good luck my friend!

 

[tech/a]

Don't over think this.

Rule 3 consider stocks with over $250000 a day average T/O for the last 10 days
Rule 4 Learn fixed fractional position sizing then learn ratchetting of stops.(widen initially)
Rule 5 choose stock on the move showing a strong volume support base/level.

NUH
BUB

Are two possible examples of late.

 

[aus_trader]

Cheers Boggo and ReXXar, I will also try and keep it simple (simple is good) and also pay more attention to debt and cash burn levels to see how long the spec stock can survive before having to raise capital again going forward...

No ETF's here for speculation, but I do like them and the closest I have to an ETF is APL in my "Medium/Longer Term Stock Portfolio".

 

[aus_trader]

Don't over think this.

Rule 3 consider stocks with over $250000 a day average T/O for the last 10 days
Rule 4 Learn fixed fractional position sizing then learn ratchetting of stops.(widen initially)
Rule 5 choose stock on the move showing a strong volume support base/level.

NUH
BUB

Are two possible examples of late.

Do like the stocks for their good trading volumes and they are heading higher.

 

[aus_trader]

Got a chance to put the new guidelines / rules into practice today with two stocks added to portfolio in the Resource / Mining sector.

By the way, thank you everyone for your contributions for keeping me on the right track and as Boggo mentioned earlier, I don't take any suggestions / advice as criticism.

1. Staying away from the hottie to pick up the ugly duckling...

The first stock is in the resource sector with Lithium exposure. This commodity has been getting a fair amount of attention and media coverage due to Lithium Ion batteries used in so many devices such as mobile phones and power tools and with the latest demand coming from electric vehicles.

I came across a few stocks with exposure to Lithium and was weighing between two of them: Lithium Australia FPO (LIT) and Neometals Ltd (NMT). So here is where the rubber meets the road as to following the adaptations to the rules as mentioned above. Without new rules or further investigation LIT would have been the choice. It's the hot pick (rumor has it, share price doubled in the last 3 trading days from 7.5c to 16c currently). Also got the looks... I mean the name, the lower price and everyone's attention with huge volume traded. But rules are rules so I am going with the higher priced stock NMT at 30c. Details of the story below...

Bit more of the in-depth analysis for the above choice. Looking beyond the surface shows LIT is a bit complicated with the recent bid for Lepidico Ltd (LPD) so not sure how involved... I mean how much of LPD has been acquired so far... Also given the share price has rocketed up in the last few days, I am not comfortable buying at current levels. With NMT, it's been a quiet achiever in my opinion. Has negotiated off-take negotiations at Mt Marion Lithium with Ganfeng Lithium Co. and started production recently. Has ~ $53m cash and ~$16m investments and receivables so that should address the debt/cash burn concerns in the rules. Has good liquidity to get in/out for small parcels of shares like mine. It's not a single commodity play either as it has diversification with a Titanium resource in development phase as well. Also the founders still have a significant stake and directorships in the company. That's the "Reed" family and NMT was called "Reed Resources" back in the day. Got surprised to see that it has paid dividends two times last year too, which is unusual for a small resource company.

2. Getting some exposure to Gas / LNG

With a fair bit of media coverage about the East Coast gas supply shortages and Liquified Natural Gas (LNG) getting a bit of attention of late, I've been on the lookout for companies with exposure to this sector. The easier way for me would be to buy a Oil/Gas giant like WPL or STO and see if there is any upside there... Well, this is supposed to be my speculative portfolio not some blue chip portfolio. Looked at a lot of oil/gas hopefuls and most of what I came across don't have anything big. Just drilling holes looking for the next oil/gas play and burning through cash. Today I came across Liquified Natural FPO (LNG) which has gapped up on big volume last Wednesday 5th of July. So just wanted to find out if there was a story to this. It happens to be due to securing funding for it's Magnolia LNG project, a whopping 1.5 billion! Which bank can I get that from ?

There is a cash pot of ~$50m in the bank according to last reported figures, so that addresses cash at hand / debt issues. Especially with the funding news liquidity seems to be plentiful so I should not have any problem exiting at or very close to market prices if I need to.