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Speculative Stocks

Speculative stocks have the potential for above-average returns, but they also carry above-average risk of loss if the company does poorly or goes bankrupt.

Speculative stocks are stocks issued by companies that have a small probability for large increases in the prices of their stocks. These companies do not have earnings records and are considered to have a high degree of risk. In other words, these companies are quite likely to incur losses and not as likely to experience profits, so they have a higher possibility of larger price gains or losses than other types of stocks.

Additional Comments:

Speculative stocks are more volatile than the other stock types. Speculative stocks are often issued by new companies with promising ideas that are in the development stages.

With oil above $70 per barrel in 2006, the stocks of many alternative energy companies with low sales and no earnings rose to high prices with investors speculating on their potential relevance in providing alternative sources of energy. The requisite quality for buying speculative stocks, because of their high risk, is a strong stomach - you have to be able to sleep well at night under any circumstances. These stocks deliver either large capital gains or large capital losses.  

Related Terms:

Growth Stocks
Growth stocks are issued by companies expected to have sustained high rates of growth in sales ...

Blue-Chip Stocks
Blue-chip stocks refer to companies with a long history of sustained earnings and dividend payments. These ...

Cyclical Stocks
Cyclical stock prices move with the economy. Cyclical stocks often reach their high and low points ...

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