Copied from SCOK Board, good post! Charmin,
Whether or not to sell is a personal choice and will be different for different investors. Reducing your position now might be a smart move as I don't believe that SCOK is going anywhere in the near term. I have been in SCOK, with a substantial position, for almost two years now and being under water to the extent that I am is against all investing rules. I will try and explain why I intend to hold on longer and quite possibly get deeper in the hole. When I first bought SCOK, I was looking to get into a commodity in the energy sector. At the time I looked at gas, oil, nuclear and coal. Coal seemed to be the most promising but not in the US due to Government regulations and environmental activism. I looked at China and decide that the prospects were better there. China needs massive amounts of coal and the Chinese government works to provide it since it is essential for industrial development. It appeared that China had huge growth potential and coal would be a big part of that. After taking a position in SCOK, several things have not gone well; the Chinese GDP has gone from around 12% down to around 7.5% ; Chinese government financial tightening has increased to try and prevent inflation; mine accidents and mine safety issues have prompted Government mandated mine closures; US and world economies are all on thin ice; and last, but not least, the short sellers attack on Chinese reverse merger companies listed on US exchanges.
OK, so what's positive that would make me hold longer? I believe the short seller attack has run its course, at least for now; I believe the Chinese economy will eclipse the US economy in the not too distant future even if it is dependent on internal growth (a sound money policy always wins in the end); I believe that coal will be a prime player in Chinese economic development; I believe the US economy will be devastated by crushing debt and possibly hyperinflation; I believe that SCOK has demonstrated itself to be a creditable company that can adapt to changing economic conditions. I also realize that each and every one of the above points could be wrong and things could continue to get worse – that's why each investor has to decide for himself.
The risks are substantial with any Chinese company but that can be said about almost any company. I survived the Tech Wreck of the late 90's; I made a lot, lost a lot, and ended up about even after several years and hundreds of trades. I now believe that energy is the future and coal is a big part of that. I would look hard at Natural gas if I were actively looking for another investment but I will stick with coal for now.
One last point: Let me clarify what I meant when I mentioned Chinese internal growth above. I believe the Chinese economic situation is similar to the US situation after the end of WWII and for several decades beyond. The Chinese people want what all people want, economic security, conveniences, comforts, and to provide their children with a better life than what they had. China will have to spend trillions to provide infrastructure for energy production and distribution, transportation, homes, education, etc. So, even if the world economies are struggling, internal needs will probably create huge demands. I think this trend will also be politically stabilizing as it gathers momentum since it is dangerous for a Government to ignore the will of its people.