Odds of these speculative stocks making you money seems very slim, says Jim Cramer

Key Concepts

• Speculation: Investing in high-risk, high-reward assets with the hope of significant returns.
• Clear Line of Sight to Profits: A company's demonstrable path to generating positive earnings.
• Parabolic Stock Price: A stock price that has risen extremely rapidly and unsustainably.
• Convertible Notes: Debt that can be converted into equity (stock).
• Negative Free Cash Flow: A company's cash outflow exceeding its cash inflow.
• Private Placement: Selling securities directly to a small group of investors.
• Revenue Ramp: A significant and rapid increase in a company's sales.
• Insider Selling: Company executives or directors selling their shares.
• Speculative Mania: A period of irrational exuberance and excessive speculation in the stock market.

Speculation and Wise Investing

The speaker advocates for speculation, particularly for younger investors, suggesting that a small allocation to speculative picks can be life-changing. However, this speculation must be done wisely, focusing on young companies with a clear path to profitability, rather than older companies with a history of losses and no immediate prospect of positive earnings or sales. The speaker warns against companies whose stock prices have gone "parabolic" and are in need of capital raises, describing this as a "recipe for disaster."

Analysis of Specific Speculative Stocks

The speaker expresses disappointment with recent speculative stock recommendations, labeling them as a "wise speculator's nightmare." The following stocks were discussed:

• AST Spacemobile:

  • Details: Up over 200% for the year, but down over 30 points from its recent high.
  • Concerns: Raised $1 billion in convertible notes and 2 million shares at $78. Has lost money for the last five years, with $677 million in negative free cash flow for the last 12 months.
  • Speaker's Stance: "No, thank you."

• Trilogy Metals:

  • Details: Up roughly 345% for the year, but has fallen from $11 to $5 in eight days.
  • Concerns: Focuses on precious metals and rare earths. Has no sales and has been losing money year after year.
  • Speaker's Stance: Implies it's a speculative gamble.

• Grail:

  • Details: Develops a blood test for cancer detection. Stock is up 347% for the year, but has pulled back from $103 to $79 in two days.
  • Concerns: Reported mixed to positive results for its test. Immediately conducted a private placement of $325 million following a spike in news. Has lost hundreds of millions of dollars in the last five years.
  • Speaker's Stance: Intrigued by the technology but warns against investing due to financial losses. "Don't kill yourself early if you're buying this one."

• For (Cogeneration Company):

  • Details: Provides on-site cooling and power for data centers. Stock is up nearly 475%, but has fallen from $12 to $8 in the past week.
  • Concerns: Has a "nice revenue ramp" but has never turned a profit.
  • Speaker's Stance: Considers it "really speculative" and prefers more solid alternatives like Vertiv.

• Aurora Innovation:

  • Details: A self-driving technology company trading under $5.
  • Concerns: Has never made money in the last five years, losing hundreds of millions of dollars.
  • Speaker's Stance: Suggests buying Tesla stock instead.

• Rigetti Computing:

  • Details: A quantum computing company. Stock is up 136% for the year.
  • Concerns: Has declining revenues for the last three years and is losing "gobs of money." A board member recently sold $2.8 million worth of stock.
  • Speaker's Stance: Questions the viability of owning a quantum computing play with significant losses and heavy insider selling, especially when results are far off in the future.

The End of Speculative Mania

The speaker believes that the "speculative mania" where investors buy high and hope to sell higher is coming to an end. The stocks discussed are characterized as "overheated junk" that are due for a bounce. The advice is to sell these stocks when they do bounce, as they are likely to revisit previous lows before a more significant breakdown, similar to the dot-com bubble of 2000.

Alternatives and Conclusion

For each of the speculative stocks mentioned, the speaker suggests there are "much better, higher grade alternatives." The overarching message is that while speculation can be a valid investment strategy, it must be approached with caution, focusing on fundamentals and avoiding companies with unsustainable valuations and a lack of profitability. The speaker concludes by stating, "There's always someone just for you," implying that there are always suitable investment opportunities available for discerning investors.