speculative stock

A type of investment that focuses on high-risk securities that have the potential of high returns. These stocks are targeted by speculators who can handle more risk than the average investor. Emerging companies, penny stocks, as well as small- and micro-cap stocks may fall into the speculative category when they lack exponential growth or strong historical data, but the trader anticipates a strong price move. Most long-term investors steer away from speculative stocks because they can be volatile and must be watched accordingly. Even though most speculative stocks are smaller and newer companies, a mature large-cap stock that has declined over the years can become a speculative stock—these are referred to as “fallen angels.”