Long term investing works well, but it doesn't always work for each individual stock. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Strategic Energy Resources Limited (ASX:SER) for five whole years - as the share price tanked 93%. And it's not just long term holders hurting, because the stock is down 43% in the last year. The falls have accelerated recently, with the share price down 20% in the last three months. Of course, this share price action may well have been influenced by the 23% decline in the broader market, throughout the period.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

View our latest analysis for Strategic Energy Resources

We don't think Strategic Energy Resources's revenue of AU$3,880 is enough to establish significant demand. You have to wonder why venture capitalists aren't funding it. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, investors may be hoping that Strategic Energy Resources finds some valuable resources, before it runs out of money.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Some Strategic Energy Resources investors have already had a taste of the bitterness stocks like this can leave in the mouth.

Strategic Energy Resources had cash in excess of all liabilities of just AU$497k when it last reported (December 2019). So if it has not already moved to replenish reserves, we think the near-term chances of a capital raising event are pretty high. With that in mind, you can understand why the share price dropped 41% per year, over 5 years. You can see in the image below, how Strategic Energy Resources's cash levels have changed over time (click to see the values).

Of course, the truth is that it is hard to value companies without much revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.