Drone News, page-699

It seems really tricky to try and buy or sell DRO at the moment and get it right.

The stock is likely to drift down while there are no sales announcements and then spike when there is. Timing is everything but it is impossible to guess the timing.

The other big report coming up in 6 weeks in 4C Cashflow. That is going to be really critical as the company has given no information about the profitability for this year, and clearly sales are loaded very heavily to the second half. There could be a big move on the result.

The maths tells us that there are no day traders and institutional investor in DRO because it is simply too small to make it worthwhile for those groups to invest (nothing to do with the stock itself). Today there were 500k shares traded. If we assume that a single day trader was involved in every trade on either the buy or sell side and ended the day with the same number of shares that they started with (ie bought 250,000 and sold 250,000) and made a profit of 0.5c on every trade, they would have made $1,250. Of course, that is an idealistic and unrealistic scenario when everything goes perfectly in favour of the trader and there are no other orders to get in their way.

The same logic applies to institutional investors. Basically, small stocks are owned mostly by small shareholders and management. This makes them particularly risky because many small shareholders are not sophisticated investors and prone to listen to the story rather than the numbers. Often they are better described as gamblers hoping for a huge win rather than investors who tend to manage risk more carefully and accumulate wealth over time. They sometimes (often) bid prices up beyond what is justified which makes this end of the market the most difficult to profit from.

Of course, as a holder I am also in that crowd - though DRO is a very small holding. I feel as though DRO is a real gamble though. I am just guessing that management lives up to the hype. They haven't always done so in the past making me wonder whether I am making a rookie mistake. Time will tell.