FDR: *Greater* than Great Bear? Part IIMy “valuation factors” analysis of FDR versus GBR posted yesterday has a certain satisfying purity and simplicity to it, but most of us speculators are here to make money. The more of it the better. Ranking GBR vs. FDR is a question of perspective.
The second way of judging whether we’ll be greater than Great Bear is in the effect FDR should have on our collective net worth. And this is messier to measure or predict. But we can make a start toward certainty.
Yesterday on CEO.ca, JuniorResourceInvesting contributed a compelling thought about the psychological mistake keeping many potential FDR buyers on the sidelines. He beat me to it. His comment merits expansion. And that is best achieved by recalling one of my favorite Chris Taylor habits.
Taylor repeated a story at numerous presentations during GBR’s 24-month run to $20 (and afterwards too). “People have been congratulating me when our stock hit [$2] [$4] [$8 etc.], asking me ‘what is your next project?’ I tell them ‘my next project is… Great Bear! There is a lot of resource yet to be defined, so GBR is still cheap.’”
As indeed it proved to be. Even at $16. I don’t recall Taylor reiterating this particular argument during the final 12 months of Great Bear’s existence, but he would have been justified had he continued to do so. Eric Coffin did, fortunately for his subscribers.
Investors’ hesitation over GBR (and FDR) is a variation on the same error of perception which helped save the financial advice industry from being put out of business by the existence and persistence of Berkshire Hathaway. Most people regard a blue-chip stock trading at thousands of dollars per share as over-valued. Or at the very least, not under-valued.
So where does that leave us today? At this, the 5-month mark after discovery, awareness of FDR is less than what GBR’s was 5 months after its initial hit. $1.50 vs. $4.00. Meaning it remains easier to scoop up cheap FDR shares. More shares of FDR owned by you (and/or a lower entry point) does make FDR greater than GBR… for *you*. Which is really the most important question.
That is to say, any simple comparison of absolute wealth created by GBR vs. FDR is an academic proxy for whether you personally made money on the trade. And why use a proxy to answer the question when we can explore it in detail, each of us relative to our own current situation and/or personal experience trading GBR?
While it's impossible to know, I suspect there are more FDR longs in at lower ACBs than were in GBR when GBR traded at $1.50. So, as a group, we FDR shareholders are already well on our way to besting Great Bear.
Once again, to anyone reading this who is not yet invested – and in size - there is still time. FDR doesn’t need to return $35/share like GBR to make you a lot of money from this day on. $1.50/share? What is that price compared to $10, or even $6?
At some point, people must consider how de-risked a project is compared to remaining upside. We know each of the “potential 10-bagger” stocks trading at $0.20 must, on average, have less than a 10% chance of hitting. Much less. Otherwise, explorers, in aggregate, wouldn’t destroy 98%+ of capital entrusted to them.
Does FDR today have more than a 50% chance of doubling to $3.00? Yes? Probably? Then it is a buy today. Simple.
Robert Wilson, an insightful investor profiled in The Money Masters (1980), opined the reason most of those people who *might* make a fortune fail to do so is they underestimate the impact of a sustained 40% CAGR. Not realizing how fast such a rate can pile up wealth.
We’ve got the best of both worlds here. FDR has positioned itself as a conservative play in a high-stakes sector. The logical choice of fortune seekers of all stripes.