FDR and the institutional buyers – Part IIA comment by Eric Coffin the other day bears further discussion. Because it answers the question many FDR fans, both new and old, might be asking themselves tonight. Namely: Now that our stock has finally broken out, should I buy more shares at these prices?
But before I get to that insight from Coffin, I can’t put into words fully how happy I am with the surge in our CEO.ca posts. I could no longer scroll back far enough to find Coffin’s “Fund vibe” comment of Thursday, July 25th. It used to be you could see at least a week’s worth of FDR chatter almost at a glance. Even as we broke through the $2.00 level, initially, in June. Now, at long last, we look like a stock everyone wants to talk about. Because they do.
And our channel still contains only trace elements of irrelevant or odd content. Though the weirdos may be on their way. Most of whom will in fact be creative bashers trying to shake stock loose from new Founders fans.
Someone may suggest a negative impact from Venezuela’s elections, or plunging gold prices due to imminent asteroid mining, or impending disaster visited by the expected submerging of the South America continental plate as discussed in a prophecy of Nostradamus. If any bizarre attacks emerge as we scale the $3.00 level, it is because all the ordinary critiques of our team and project have little ability to convince anyone.
Now, back to what Mr. Coffin said. It ties into an idea I mentioned some time back. It is a paradox how the most aggressive retail investors often ignore companies that don’t promise 10x or 20x profits. They miss the optimal balance of risk and return that applies to all investments, conservative and speculative alike.
While I am reluctant to put even a theoretical limit on how high Founders might rise, I will admit that at, say, $3.00, it becomes harder to convince oneself of expected 20x return on capital. Yet, if we accept the premise that institutional investors are at least as smart as retail, if not smarter, why do more small FDR fans not follow their lead?
Which would you rather have? A better-than-50% chance at a double? Or one chance in ten of making 10x your stake? The expected value of the above two scenarios always favours the double.
We can debate just how much better than 50% FDR’s chances might be of doubling from here, but that difference is not immediately relevant to a buy decision. Which is why bidding from funds and other institutions / Family Offices / high-net-worth retail has all but eliminated any pullback entry opportunities in our market action.
Someone else, I forget who, reminded us again of the strong correlation of the $3.00 price level with margin eligibility for most retail investors. I do not know whether that will add extra fuel to the fire of our advance. Institutions don’t really need margin, though some might use it if their mandates allow and their love of a stock is great enough.
And this last week saw FDR become the object of some pretty profound professions of true love from the institutional sector. That much seems certain.