There are about 1,100 listed companies and each company has at least a few hundred shareholders. Statistics shows there are more losers than winners in the stock market and the main reason is that the ignorant investors are shareholders or buyers of hopeless stocks. On every trading day, almost all the listed shares are traded. Companies with good profit growth will attract more buyers and some hopeless companies will attract fewer buyers.
For some mysterious reasons, there are always some people buying hopeless shares. For the purpose of this lesson, I take Deleum as an example for illustration. Please look at the share price chart and its 3rd quarter result below.
After you have looked at the share price chart and its 3rd quarter report, would you buy Deleum?
Its business is providing services to companies involved in the exploration and production of oil and gas. Since oil prices have been falling from above 100 US$ to about 45US$ per barrel, there are fewer companies interested to explore for new oil fields. As a result Deleum has less revenue and profit as shown in its 3rd quarter report.
This stock cannot comply with my share selection golden rule. It cannot make more money in this current year than last year.
Never buy down trend stocks:
The share price chart shows that its price has been falling for about 18 months. If you buy it, you cannot know when the share price will rise higher than your cost for you to make profit. Never buy down trending stocks.