Gambling is about random chance. Some people treat the market like that. Honestly there are somethings that I treat like that in the market. For example yesterday I bought a very small position in the parent company of moviepass. It's a great product with horrible management and the stock is crashing so I figured why not. It might rebound or it might crash. The app robinhood is great because you can do $20 gambles without commission.
However investing done correctly is not gambling. It is taking an ownership in a company. There are 2 reasons why investing is not gambling. First the element of chance is greatly diminished. Second by investing I am providing the company I own shares in much needed capital support. I will use Smith Micro (SMSI) to explain these points.
First the chance discussion. I spent hours researching Smith Micro before I ever put a dime in. I know all of the products they offer. I've read their yearly and quarterly reports. I believe the plan that they have will succeed. I believe as they have stated that they will be profitable within 6 months. Last quarter they lost 10 cents per share. I believe by the end of the year they will be making 5 cents. As an owner I am entitled to that or they may at their discretion reinvest that money into the company.
Because I am banking on a future value of the company my shares will be worth much more. There is a chance it doesn't happen. But it is no greater than the chance my business fails. Unforeseen things happen but that chance is not the same chance as gambling. I admit that I am gambling with my hmny shares. Some people spend $20 in lotto, I spend it on robinhood. However my other investments are not a gamble.
I have to go but will discuss the capital support aspect later this evening.
In a way its gambling, some people lose big time and others make money but not on the same level as gambling in Las Vegas. With stocks you are in control of what you buy but with cards, etc, luck in in control of what you get, you have no choice.
If someone says Facebook is a $530B company, what does that mean? It means that fb stock is $185/share and there are 2.4 billion shares. Multiply those 2 numbers and it's a $530B company.
Investing is about figuring out what a company is worth in a given time frame. SMSI in my opinion should be worth $400M by next year this time. I base that on the company should be earning a profit of $14M/year based on what they have said. Most software companies are worth 28 times what they earn so SMSI would be worth $400M. That's $20/share.
Getting to my second reason why this is not a gamble. Right now the share price is exactly $2.00. If I was not invested the company would be somewhere south of that. Let's say it would be $1.99999. My investment along with many others is providing capital support.
A few weeks ago they sold stock above asking price because they needed the quick cash to ramp up something that they have yet to reveal. The company was dependant on me and many others being bought in to get the funding they needed. If nobody was in the stock and it was worth .25, they found never have gotten the money they needed. Sometimes it's through stock. Sometimes it's a bank loan. Other times it's simply getting a new client signed because nobody would do business with a company that's only worth $1M for example.
By being in the stock, I am participating in the company's ability to operate. Its the beauty of the capital market. Little guys like me can help much larger companies grow and succeed. You can either stand around and throw tomatoes at the "greedy wall street" or you can find companies that you like and support them with the hope of being rewarded for your support.
If you want to gamble on a stock, this is the one to do it on: HMNY : Summary for Helios and Matheson Analytics I - Yahoo Finance
They own moviepass: MoviePass | Watch New Movies in Theaters
They are completely out of money and will need to sell the business, go out of business or raise prices to cover expenses. Quickly!
Its $0.62 today. Last week it was $2.00, last month $4, A few months ago $10, a few months before that $30.
If you put $100 in today, you're not going to have $100 in a week. It will be somewhere between $0 and $500.
Use robinhood app for commission free trades.
I'm not going to do anymore than the little I have in there, but it could be fun.
Getting in the shower is gambling with your life, if you want to go that route.
However, when talking about money - the market is gambling with money. You are betting that such and such a position will make you money. Holding XX shares XX long.
Gambling in Vegas is the same thing - people who make a living doing it, don't bet against the house - they make side bets because they know the odds. Most people are uniformed as the odds. This is even more true in the stock market.
First, if you live in America and don't have moviepass, you should. Let me know. I can send you a referral link that gets you 1 free month. I get nothing out of that referral.
Secondly, if you want to gamble with the stock, HMNY, it remains a great gamble. Today the CEO had a lot to say: MoviePass Owner Hits Back at Reports Service Is Dying
He said things in there that you can't say unless you want to end up in jail.
service has roughly $300 million available to it from an equity line of credit." - No they don't. The admitted in an SEC filing that they have about $15M
“We’ve got 17 months’ worth of cash without further raises of capital.” - You can't say that. They are raising capital almost daily.
"The Helios CEO said that he was finalizing a major acquisition in the coming days that will be announced at the Cannes Film Festival.
“It’s going to be substantial,” said Farnsworth. “People are going to go, ‘Hmm how did they pull it off?'” - You can't make statements like that when you run a publicly traded company.
Its at $.65 now. Its still a great gamble(not an investment) if you have $100 to throw away because you might lose it all.