Hello again, welcome to the latest instalment of Money Ball. This post is going to focus on a few things that I love, in order being:
1) Speculative stocks
2) Pretty graphs
The equity in question is an oldie but (potentially, hopefully, soon) a goodie. ASX:FAR, or First Australian Resources (Unfortunately, we could not get stock quote ASX:FAR this time.) has been kicking on since the 80’s drilling holes all over the world looking to strike the black gold/gas. As their user-friendly website proudly proclaims “FAR Limited is an independent, Australian Securities Exchange listed (ASX: FAR), oil and gas explorer with high potential exploration and pre-appraisal assets in West and East Africa”.
So why would we talk about FAR now? Well to begin, they found a nice underground patch of oil off the coast of Senegal in 2014. That got the juices of the market flowing, and sent the share price into a tizz. But as you’ll see, that’s been pretty common over their history.
Now to the first pretty graph:
That’s data from Google Trends, and shows relative search interest in the terms ‘oil’ and ‘oil price’. Note how both seem to kick off from a flat spot near the middle of 2014? Well whatever, I saw it. Relevance? As we all get worked up into hot sweaty messes over the end of fossilised plants and dinosaurs powering our cars and industry etc etc etc FAR becomes an increasingly attractive asset, due entirely to the fact they search for untapped reservoirs of the black sticky stuff. I reckon quite a few punters would be thinking along these lines, and they think they’ll get rich if FAR strikes oil. That may be true, but they’ll be FAR (gotcha) better off if enough mum & dad investors just choose to buy FAR. Simple supply and demand, enough people want it and the price will rise.
Am I on the money here? Check out the regression output (and pretty graph #2) and see for yourself. The OLS model I used throws out a very interesting result as to the nature of the relationship between the price of FAR and the Google Oil Index. The FAR Volume relationship is much more vanilla sadly. Next time I’ll use a more robust approach that better fits the nature of the data in question. Until then, happy speculating!