The business as usual thread, page-904

Research, knowledge and gut feeling my friend is not blind faith.

http://www.investopedia.com/articles/stocks/11/calculating-risk-reward.asp

If I buy SGH at it's current price of $0.285 my maximum risk is that amount.

If I put in a 'stop loss' my risk can be less.

Let's say I don't. I wan't to ride this one out no matter what.

So maximum risk is $0.285.

I then need to look at the reward side of things. What do I get for the $0.285?

In simple terms I get this:

- part in a $900mil+ revenue international leading law firm
- a company that is 'on budget' according to management
- a company that has main banking syndicate support as per latest announcement
- a company that has passed the 'greatest risk' phase of a major restructuring and business improvement program which has been paid for mainly out of own generated cash flows
- the restructuring and business improvement program when complete may create a material competitive advantage in relation to competitors
- a company that is hiring permanent NIHL post settlement staff in the UK (this portfolio alone could be worth $100mil to $200mil)
- a company which in the UK have 98% of clients recommending us
a positive Barrister's opinion in relation to escrow money worth 50mill British Pounds.

Then the unknown in relation to our major UK purchase from Watchstone. Are we going to sue Watchstone and/or our external due diligence high profile advising specialists (if going ahead on this and if successful then it could be worth multiple.

Then on the flip side we have a large debt covered by term loans (which we may address if some of the above points goes in our favour) and the MB CA (which we are defending robustly).

I have not considered the dilution speculation at this time as it is pure speculation.

Based on the above how far could the share price jump in a reasonable time frame?

That is anyone's guess.

For me I think there is a possibility for a reward of $8.00 within two to five years (less than two years ago share price was $8.00+). People can argue against that but that is what I believe in.

So for an investment of $0.285 I could possibly gain $8.00 within two to five years. A possible return of 2800%.

I then need to calculate the probability of that happening. The facts above indicate that good and/or bad things may happen to SGH in the not to distant future. I think a conservative guess based on probabilities (bad vs good) would perhaps be a share price of $2.85 within 3 years.

This would then give me a three year return of 1000% for a risk of $0.285.

We all work differently under different circumstances, needs and risk profiles.

But for me the above SGH investment would look good in my portfolio

By the way the above is not how I work out my risk/ rewards. It is purely to provide an example that if I went for this investment it would not be 'blind faith' in my opinion.

DYOR