>>70
>>75
' >most average investors look for excuses to buy the company. They try to confirm their beliefs or feelings on a pick or stock.
http://en.wikipedia.org/wiki/Confirmation_bias
' >I do the opposite and look for excuses not to buy the company
http://www.socialresearchmethods.net/kb/dedind.php
http://www.youtube.com/watch?v=X8xxtygm_xM
http://philosophy.lander.edu/logic/ded_ind.html
Deductive reasoning is when you apply a theory, inductive reasoning is when you draw a hypothesis from the facts, though I'm sure a philosophy major would prefer to describe it as "going from the particular to the general" or whatever. We use inductive reasoning in our everyday lives and we are usually right because we have plenty of experience and opportunities to test assumptions like how long it takes to toast bread or how often to vacuum, I suspect that many instinctively resort to inductive reasoning on the stock market. Trying to do the same in a field as unfathomably complex and difficult to observe as the economy will lead to inaccurate conclusions unless you have an opportunity to test your hypothesis, unlike other sciences where you can perform as many experiments in the laboratory as you want, we can only analyze historical data or make predictions and watch how they play out. This means that accurate conclusions on the stock market will be largely based on deductions based on tried and tested theories rather than attempts to draw new hypothesis' from new situations.
That does not mean inductive reasoning is always inaccurate, just that we should first use our more accurate tried and tested theories before performing well researched inductive reasoning, for instance confirming if Orthovisc will continue to gain sales. When you "look for excuses not to buy the company" I think this is what you are doing, you use deduction to narrow down the list of possibilities like Sherlock Holmes, though likewise deductive reasoning isn't always accurate, as you say if the market starts acting unpredictably that means your theories were not sufficient.
http://www.northernoil.com/
http://en.wikipedia.org/wiki/Bakken_formation
http://oilshalegas.com/bakkenshale.html
' As of March 31, 2012, Northern Oil controlled approximately 173,000 net acres in the Williston Basin Bakken and Three Forks plays
I have heard of North Dakota's oil boom.
http://uk.finance.yahoo.com/q/ks?s=NOG
http://ycharts.com/companies/NOG/book_value_of_equity
Asset value was 586 million in december 31st according to ycharts and 586.4 million according to yahoo finance if I take Price/Book divide by share price and multiply by market capitalization. I'm sure I'm missing something in yahoo finance here.. Market capitalization plus debt comes to 1322 million, over double the asset value, not sure if this is normal for the oil industry.
What got investors excited in September 2010? I have been reading various SEC filings, they had acquired land and were completing wells months before the share price spike, doesn't seem significant. Could have been just the usual bizarre investor behavior.
http://ycharts.com/companies/NOG/net_income_ttm
According to this their income rose during 2011 and since September 2011 their net income has remained over 40 million yet stock hasn't risen that much. Could it be because investors feel it is over-saturated?
Obviously gas prices are always on the minds of investors, I hear people talking about gas prices all the time. On one hand panic selling might result in a few undervalued companies once the dust has settled, on the other it might stunt developments like this.
As I was skimming through SEC filings I could see the importance of avoiding confirmation bias when conducting inductive reasoning, I thought to myself the spike in share prices was likely because they had started drilling and this made the news or something, as I was reading through I discovered they had built 40 wells in the quarter ending June 2010 and for a moment assumed I had found the answer yet that theory of mine was conjured up on the spot, it was not a tried and tested theory. I should be reading at least 4 quarterly reports and watching conference calls, absorbing as many facts as possible, before jumping to any conclusions.