Speculative Company

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    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 >>
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    There are no set guidelines or requirements that determine when a company will split its stock. Often, companies that see ... Read Full Answer >>
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    If you want to engage in speculation of an asset while limiting your costs, use a derivative security. Since a derivative ... Read Full Answer >>
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