RE:RE:RE:RE:RE:RE:RE:Reserve?You may be right that the upside from here is only a 2 or 3 bagger but in investing one also has to consider the downside and everything in between. Many stocks that have a very small chance of becoming a 10 or 20 bagger also have a high probability of losing money or going to zero. SIL will make money and have a positive return in almost any scenario you can think of. A lot depends on one's risk preference. These two bets have the same expected value of 50% return:
A B
% Return Probability EV Probability EV
1000 .02 20 0 0
500 .03 15 .02 10
200 .05 10 .03 6
50 .30 15 .60 30
20 .25 5 .275 5.5
-20 .25 -5 .075 -1.5
-100 .10 -10 0 0
TOTAL 100 50 100 50
Which one would you choose? A has a 2% chance of becoming a 10-bagger but also has a 35% chance of losing you money or wiping out your entire investment. B has no chance of becoming a 10-bagger but also no chance of going to zero and only a 7.5% chance of a negative return. SIL today is my largest holding and it looks more like B. Four and a half years ago it was one of my smaller holdings because it looked like A. You might want to own some of each type depending on your financial situation and risk tolerance. That's why giving financial advice is so difficult.
There are also other factors to consider. In any business, but especially in a depleting resource business like mining or energy, one of the big risks is reinvestment risk. If all goes well, in two or three years SIL will be generating obscene amounts of Free Cash Flow. What are they going to do with the money? Given my experience with the predecessor company Silvercrest Mining and the fact that this team has taken SIL from 15 c to $12 without any missteps in a most difficult and volatile environment, I have high confidence that they are not going to piss it away.