In small caps the space I invest, psychology plays a massive role. In fact its the ultimate thing here... The facts change so fast and the stock you never wanted to hold becomes the most favourite ever...
For example, I invested in Force and it really turned out to be sour as Mt Adrah which was the priority of the company got the investors bored. Suddenly, the whole board changed again which was only appointed 3 months ago with Jason Brewer joining the board. The guy was not known at all or was known with negativity. It made investors even more bored... I lost almost 50% of my capital on a large parcel (large enough for a small guy like me). And this happened when I thought I was getting better in my investment choices lol
Emotions - I was bloody all over the place not happy and all. Market sentiment in small caps was all times low as well... No one wanted small caps and it was a difficult place. Then suddenly it all changed... Market was a happy place again.. MEI - one of my stock made 3 bags which is now 7-8 bags and looks better and better.
Now coming back to Force - it ran to 7c and came back to 3 and then found its trading range around 5-6c... Every one was saying the lease they have got is early stage and all and kept comparing it with AVZ... Although it is a nearology play with AVZ but honestly you can't compare the two... One has a project value 700m plus and other has a market cap of 32-35m fully diluted with two projects not just one...
One project is 30kms and other just 5kms away... So literally every project is valued like 10-12m each keeping in mind their existing projects of gold and zinc has some value and cash... This is now IMO is way cheap in its own right in this lithium market cap where literally stocks have larger market caps of 15m just being shells with a lithium lease which might be worth nothing... But they happened to be at right space right time... some lithium stocks have market caps of 30m plus literally being lithium stocks... nothing is cheap in this space... Now 4CE with being two projects has a market cap 30m ish.. Again not comparing it with AVZ as AVZ is a mother of lithium assets... Yes sovereign risk is there which s huge but infrastructure risk is almost gone... Everyone who understands the industry knows its a TAKE OVER target and it will be taken over sooner or later (sooner more appropriate I think)... My question is (again based on psychology) that what is going to happen when AVZ is gone? And infrastructure is being placed already?
Also another question to myself is... 4CE is the only lithium play which has mining licences for both its licences and now all mine equipment thanks to MMR JV... so if they hit something there which is highly likely as one licences is currently producing tin and other has historic tin production only small scale and done by artisanals... what would be 4CE market cap?
This whole story makes absolute sense... of course there are risks and that's why its a speculative stock... but then its making me money and almost every one who has invested in the stock in last 3 years or so (referring to chart so I may be wrong) other than the ones who bought on last week at 7.7c and higher...
So all in all, my guts tells me that it will have to make 15c plus as its just way too cheap... But would I be right? Or I would be wrong? don't know the answer... definitely not if I rely on psychology or my own emotions... so I have to go systematically I guess... So I am using my skills, the things I have learned over the years I am now applying them here...
1. Cap raise done at 5c.. why? who were these people? there was no incentive along with it? no commission, no options no freebies? Yes, there was an acquisition and a good one... but why no discount? There has been at least 20 good acquisition recently where at least 20% discount was offered. So its not a norm... This means the new investors are paying 5c and they would like to get at least 10c plus... I mean in this hot market? time will tell for sure but it has minimised my risk and should provide a solid support around 5c IMO
2. Market cap of stock around these levels looks very reasonable and risk vs reward is very good.
3. Peer comparison - it looks very good on this alone. As said not many decent lithium plays with this market cap.
4. AVZ has done all the hard work... particularly infrastructure is in place... this means if there is some lithium in 4CE leases that will be valued appropriately... however, if they hit it holders will be very happy.
5. News flow will be very good... As they have funds to explore and fast track exploration particularly new asset.
The whole point is... this is how I control my emotions as I quite often invest in stocks where I want to have few bags... such as
MEI - 7-8 bags so far and I took some profits as well
4CE 3 bags plus
VEC 3 bags plus
JAT turning out to be way bigger than I thought
OOK in a TH
BDA with their licence
and few others
All in all, its very hard to hold your winners and cut your crap if you don't know how to control your emotions... how to deal with rollercoaster in both good times and bad times... I have stressed time and again that we need a strategy and a powerful one if you want to survive this end of the town... scary stats such as 85% people lose money in stocks etc are well known... apply this figure to small caps and it might come out even scarier... and a profit is the best thing but selling winners too early is equally bad and hanging on to something which is crap or has realised its true potential can be equally damaging...
Hence, psychology plays a major role in anyone's trading including people like myself who many might think are guns... I would say, lets keep working hard and keep spending time to find winners... The opportunity is endless here but its not an easy place as many would think.
