This is a question to fundamental traders of speculative stocks.
I understand how to value companies that are producing an income or companies that have non-cash assets, but the question of how to value (for example) the likes of explorers without a defined resource always escapes me as the risk premiums to attach to such companies is so subjective and is likely to influence the final valuation more than what you're actually attempting to value.
In the case of stocks with significantly valuable assets or those that produce an income, there is always going to be a push to some intrinsic value.
However for companies with nothing but a dream, a drilling rig and good intentions no matter how good it is, there is no real intrinsic value for the market cap to push toward. And this is evident everywhere - companies that have seemingly fantastic prospects languish for years while those that are no further advanced, significantly appreciate with no apparent differential.
So, for a fundamental trader, there are no shortage of opportunities to identify companies where an arguement could be made that they are materially undervalued. After entering one of these companies, how do fundamental traders of speculative companies manage their opportunity cost if the SP does nothing for extended periods? Are they happy to hold?
I get the impression that at the moment, things are relatively easy. There's a lot of speculative money floating around at the moment looking for a home and as soon as one of these little companies get some press (eg a forum) people start buying in and they move very quickly. How do people that trade like this (eg. Young Trader) plan to trade when things aren't so good? Abandon the philosophy or extend their time frames?
Yes, I know this post seemingly has no point, but its something that i've been pondering of late. Fundamental traders of speculative companies seem to be highlighting new companies here at ASF every day that they claim are significantly undervalued (with reasonable success I might add) and I'm beginning to think there is no end to such opportunities. So feel free to ponder along with me and share your thoughts on the matter.