I’ve had this eccentric theory for a long time. My friends either laugh or give me the “That’s nice, James” look 😉 By my observation, the stock market is run by 12 year olds. Sometimes, logic doesn’t apply and the crowd will rule… maybe I could make a buck or two riding a wave.
The stock market is chaotic by nature, almost anything can make almost anyone rich… or poor. It’s very hard to pick stocks that make money. that’s why most people spread out their risk with products like mutual funds. It’s still possible to make money with individual stocks, though. The trick is to find the right circumstances and the right company. My idea isn’t to day trade, it’s more to “opportunity trade”. A couple years ago, I read an article about Pacific Ethenal. I was just looking for alternative energy companies. It mentioned that Bill Gates was going to invest his personal money in this company. As I thought about it and researched the company, I realized that the stock was probably going to go up. They were making a profit, had some big contracts in California, no debt… PEIX looked like a well run company. All of that was secondary, though. As long as the company looked good on paper, the fact that Bill Gates was jumping in made it a good bet. For one thing, I trust Bill Gates’ ability to pick stocks, don’t you? He’s had more winning stocks than everyone else has had losing stocks. For another thing, the fact that he was investing in the stock had to draw other investors. Add all that together, and PEIX was a good bet. I’ve been finding one of those opportunities about every 6 months lately. I don’t invest anything, but I like to watch the stocks. I decided to write about my theory because I made $56 in imaginary money on Gateway today. I shadow traded for 100 shares of GTWY at $1.26 a week ago. I figured that I might actually risk $126 in the real world. The company was talking about expanding in China… their numbers weren’t that great… but it seemed like they were serious about the China thing, and there were whispers on finance.yahoo that they were a good candidate for a takeover. Gateway closed at $1.82 today on news that Acer is going to acquire the company. It wasn’t as sure a thing as Pacific Ethenal was, I griped about owning it (even for pretend) and thought about “selling” it, but if it had been real, I would have still owned it through a 50% rise. If I can establish that I can pick winners more often than losers, I might try it for real… I’ll let you know if I do, win or lose.