A good number of tech stocks with Mcap >$100m with minimal revenues - I can see a YOW (Yowie) or EDE experience all over again in the quarters ahead- despite having dropped by half or so their valuation remains high (although when compared against their all time high they look like bargains) because there remains an expectation that their business models will generate substantial revenues in the quarters and year ahead. But ironically IMO while a good number of them will produce revenue results but will unlikely be those that were expected and they would continue to be cashflow negative even after another year and their price graph would likely look like an inverted S curve.
Often ask myself whether buying an unprofitable small cap tech stock is investing or speculation- if it was the former you could park it away and not look at it daily or feeling somewhat uneasy when the short term price drops, but I come to realise that it is more the latter even if we are prepared to hold them for a longer term because you are still speculating that they would produce the desired revenue results (since they have yet to prove themselves at doing so). If so, why would it be wrong to trade the stock then and not beholden to the thought of being a long term holder especially when there is already reasonable or substantial paper gains. Why risk those capital gains only for them to be taken away by an outlier event such as those that happened with BIG/GSW or a world market turmoil beyond our control? However good the stock is, it is always there to be bought back even at higher prices once the company has started to prove itself. Knowing when an investment is an investment or speculative punt helps us determine if we should put an investor or trader cap on (and when I mean trader, not an intraday trader). I posted before somewhere (I think at BIG forum) that from my experience, I have bought lousy (in hindsight of course) stocks and made money (eg YOW, EDE, YOJ, GSW) simply by buying at the right time and selling not at the wrong time ( which would have been better outcomes than (a) buying at the right time and not selling or (b) buying at the wrong time (eg people buying after a fall thinking it won't fall further) and selling later (after further falls) or not selling at all).
We don't always have to make money only on good stocks and when 'investing' in small cap stocks, my main objective is first not to lose money and then second to make money.
