Speculative Company

AAA

DEFINITION of 'Speculative Company'

A company with a significant percentage of its assets tied up in projects with uncertain returns. A speculative company participates in projects with high probability of failure. However, should a project succeed, the returns can be very large.


The stock of speculative companies is not necessarily classified as speculative stock, however, since the expected return of an established speculative company's stock (such as Exxon Mobil Corp or Shell Canada) can be reasonably estimated.

INVESTOPEDIA EXPLAINS'Speculative Company'

Energy companies are an example of a speculative company, since they are continuously committing a significant percentage of their assets to exploration projects. These companies often experience many failures before a project succeeds. However, should they find a new source of oil or natural gas, the potential returns are huge.

RELATED TERMS
  1. Speculative Stock

    A stock with a high degree of risk. A speculative stock often ...
  2. Return On Assets - ROA

    An indicator of how profitable a company is relative to its total ...
  3. Speculator

    A person who trades derivatives, commodities, bonds, equities ...
  4. Defensive Company

    A corporation whose sales and earnings remain relatively stable ...
  5. Return

    The gain or loss of a security in a particular period. The return ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Investing Basics

    Industry Handbook

    In this feature, we take an in-depth look at the various techniques that determine the value and investment quality of companies from an industry perspective.
  2. Home & Auto

    Why Housing Market Bubbles Pop

    Home price appreciation is not assured. Can you withstand the volatility in this market?
  3. Options & Futures

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  4. Economics

    Economic Meltdowns: Let Them Burn Or Stamp Them Out?

    Whether the Fed should intervene in market bubbles is up for debate. Learn about both sides here.
  5. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.
  6. Options & Futures

    Understanding Bull Spread Option Strategies

    Bull spread option strategies, such as a bull call spread strategy, are hedging strategies for traders to take a bullish view while reducing risk.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares Silver Trust

    Learn about the iShares Silver Trust, an exchange-traded fund that invests primarily in silver and is affected by risks unique to commodities.
  8. Fundamental Analysis

    20-Year Treasury Bond ETF Trading Strategies

    iShares 20-Year Treasury Bond ETF offers a highly liquid equity alternative to direct bond exposure.
  9. Fundamental Analysis

    Spectator Vs. Speculator: Two Market Approaches

    Spectators and speculators rely on different mechanisms to identify and profit from market opportunities.
  10. Professionals

    Characteristics Of Successful Traders

    Successful traders share psychological characteristics that augment their personal and financial power.
RELATED FAQS
  1. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  2. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  3. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  4. How can an investor profit from a decline in the real estate sector?

    Speculation enables investors to profit from a decline in the real estate sector. The most popular forms of speculation for ... Read Full Answer >>
  5. How does a company decide when it is going to split its stock?

    There are no set guidelines or requirements that determine when a company will split its stock. Often, companies that see ... Read Full Answer >>
  6. What securities can I use to engage in speculation of an asset while limiting my ...

    If you want to engage in speculation of an asset while limiting your costs, use a derivative security. Since a derivative ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!