great post t4p. even people that didnt invest in AGY could learn a lot from what you said, particularly how to manage spec risk and the attitude one must have when unforseen events like this happen.
another tip for managing spec risk i would like to throw out there is to diversify (i know this sounds like a broken record - but there is solid logic to this rule of thumb). by diversifying you can effectively eliminate unsystemic risk. unsystemic risk is when something unforseen happens to a particular stock - such as AGY in this instance. i will give an example to illustrate...
portfolio 1 100% of AGY
portfolio 2 10% AGY and 9 other 10% lots in stocks that have expected returns similar to AGY
portfolio 2 still has all the benefits of having all ur money invested in AGY (as the other 9 stocks invested in have similar risk/reward profiles), however, portfolio 2 has effectively minimised its unsystemic risk. it costs nothing to diversify, and u can effectively eliminate a key form of risk - for free. diversifying does not have to necessarily 'diversify your gains away' but rather only excessive diversification would have that affect. i would consider >30 stocks to be excessive... IMO.
ofcourse there is also systemic risk too, which is the risk of a general downturn in the economy or threat of unfavourable trading conditions. it makes sense then that no matter how much you diversify you can not eliminate this risk... so you will always bear this risk in the markets. however, for bearing this risk you are rewarded with extra returns beyond the risk free rate - known as the "market premium". bearing unsystemic risk does not give you any reward however... this is why its logical to minimise it as much as possible.
i know its a basic concept but i have heard from a friend that some of the newcomers to the market have effectively lost 60% of their capital due to this... which is very unforunate. the best you can do is to try learn as much from this as you can, usually the best lessons in the market are the most costly...
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