Hi Eddy: Someone send this to me today, looks a lot like Mill. Commentary
The area play.
If you have been playing the spec stocks long enough, you are likely aware
of this term. For those that haven't, perhaps we can define it for you.
It is a way for promoters to take their stocks higher ...
Here is how it works. One company goes and does something good, something
that the market likes and makes the stock a high flier. Soon after, you
have a rush of companies who go out and do the same thing with the hope
that some of that success will rub off on them.
How many companies had property in Indonesia after Bre-X made their alleged
find?
How many companies have staked in Voisey Bay since Diamond Fields hit the
jackpot?
Human logic tells us that if one company can do the same as another, more
successful company, they too will be successful.
A = Success
If A, then Success.
Therefore, do A.
Unfortunately, although seemingly very logical, the reality is that it
rarely works that way. But, the promoters and company insiders will never
admit to that. After all, they sell their stocks on hype, on the dream.
"We are going down the same path as blah blah, who, as you know, are now
trading at $20. Don't you want to be part of the next blah blah?"
To which the market answers, "Yes sir, yes sir." And so the pigs hustle off
to slaughter.
The area play term stems from the mining and oil and gas industries, but it
is not reserved to the search for natural resources. Currently, we have
area plays in automotive innovation stocks and, to some degree,
pharmaceutical stocks. How many copycat Ballard Powers can you count today?
How many could you count last year?
Now, some of these stocks which we lump into the copycat pile could very
well have fantastic businesses with fantastic opportunities. They probably
were around before Ballard was a success, and are now in the spotlight
because of Ballard. And so, yes, they could do the same thing.
But what are the chances?
Slim. Yet they get valuations which reflect the excitement that exists in
the market for these types of stocks. And the shrewd trader can make great
money off of the stocks as they run higher, and then when the run down
again. The key, as always, is don't believe the hype. Believe what you can
see, what you know to be true. But heh, have fun looking for the next blah
blah ...
And so goes the dream, and so the dream goes on and on and.......
Enough Said. John |
