Gambling on Exciting Companies Loses You Money
Why do most traders lose money?
One of the answers, I think, is the thrill of the chase: trying to chase volatile shares up and down. Shares like Quindell, Tungsten, Plus 500, New World Oil, Xcite Energy, Coms.... the list is endless.
But all this isn't really "trading" or "investing" - it's pure gambling for pure adrenalin and perhaps to relieve boredom elsewhere in your life. And if there is one thing that's certain: gamblers always lose eventually. Sure, there will be big wins too that they'll boast about. But the losses on punts will always be the eventual winner. Which is why any spreadbetting firm will tell you, most accounts blow out, and many quite quickly.
If I can help at all and you have the gambling mentality - just use 10% of your total pot to have fun with in a separate account. Expect to lose it all, have fun, get some kicks, when it blows up you only lost 10%.
But with the other 90%? Trade properly. Buy really boring stuff - really boring companies where profits are rising, there is a bright future, great prospects, and, hey even a dividend.
I would say being in the lucky position now of having made millions in the market that all that profit has come from boring stocks. None of it at all has come from any "exciting" companies - you know, the ones beloved of bulletin boards.
So here are some boring companies I'm in and why. I bet you never heard of most of them. Which is good. The less people in my shares, the less volatile they are.
What is ironic to me is I betcha you read about these boring ones, nod sagely, but move right along to the next "exciting" volatile share you can find. Now that's odds on!
Starting with a recent buy, Quantum Pharma (QP.). See - told you you'd never have heard of it.
Nicely quietly under the radar this one - and I expect to double my money over the next year having bought it at 114p and recently added more at 120. My target price is well over 200. Potential for even a treble, over say three years.
This pharmaceutical maker, developer and supplier actually makes money already. Operating profit soared nearly 200% between last year and this. A dividend is coming and net debt has come in very low after raising money by listing a few months ago.
With a super pipeline of products and with low debt the ability to grow by acquisition as well as organically - to me it's a lovely (for now) low risk one to tuck away in an ISA, go on summer holiday with peace of mind and probable lovely continued capital increase.
Another one I bet you never heard of is Energy Assets (EAS).
I'm already up 70% on my first buy of these and I've bought some more this month.
This company is the largest independent provider of industrial and commercial gas metering services in the UK and provider of electricity metering and data services. Demand for the installation of advanced utility metering and related services remains high and, as a result, Energy Assets says it continues to experience strong trading and growth.
This area of the market just keeps on growing and Energy Assets is taking full advantage of its position. It just keeps announcing deals too - recently one with City West Homes and Westminster Council. This is another boring one I expect to hold for some time.
Now one you definitely heard of: Aga!
People might be spending again on bigger ticket items now the election is over and also with the freedom to use up pension money I wonder how many pensioners in the country fancy buying an Aga...
My desire to buy Aga has been cooking away slowly over the last few weeks after it lost half its value and I have been building a stake in it starting in the 80p area and buying more as it hit 100p.
Its last results show nice signs of an upturn (it also owns Fired Earth where posh mums buy overpriced tiles, I should know, we have some!) Revenues, profits and cash balances are rising well. Its AGM statement was interesting and intriguing, containing the phrase, "We are exploring a number of strategic options".
If revenues and profits continue to rise the shares are going to look mighty cheap. Perhaps they might not reach the dizzy heights of nearly 200p - but any recovery statement could see them back up in the 130-150p area.
If any of you are left reading stuff about boring companies this one will finish you off! Empiric (ESP) specialises in buying sites and turning them into student accommodation. (That's the last reader gone now.)
I expect a gradual rise in the share price and some decent dividends and I reckon anyone holding with a three year view will get a lovely "sleep at night" capital rise even if the main markets tank and some nice cash in the accounts too via the dividends.
That's it from boring me this time, next time I'll be back with something really exciting. In the meantime.. I really need some sleep. Night night.