DW8 Growth, page-2742

Re: the earlier posts on upside left and return expectations from here, whether it is too late to buy or if there's a max price at which to buy:

It is important to remember that achieving any substantially outsized returns that a stock may offer -- assuming all else goes well with the company fundamentally -- requires compounding which takes time -- and this is measured in multiple years, to be specific -- and is also very much entry point specific. While everyone wants to own the hot stock that went 50x, 75x, or 100x (in crystalized returns, not unrealized one-time peak returns) the reality is that statistically speaking even most early-stage investors don't usually stick around long enough to ride the wave until they reach these levels, or they trim positions aggressively to lock in returns along the way. That's largely because patience is increasingly difficult to maintain once you surpass a 20x or 30x etc return on a sizable investment and, for example, when the rest of one's holdings may not show the same returns, and/or another opportunity arises. And that's the second part of the investment conundrum -- not every investment turns into a multi-bagger. Sorry to state the obvious. Otherwise, this forum would be filled with millionaires who started with $10k and had two successive 10 baggers they invested in since they started investing less than 24 months ago. So when you come across an opportunity that ticks all the boxes better size accordingly, as these opportunities are rarer than one expects. Also a reality check: most investors' hit rate isn't that great (or as great as they believe it is) and almost everyone cuts their winners way, way too early when they actually have a winning company in their portfolio. Good investors are able to objectively assess their strengths and weaknesses, great investors invest accordingly. (For more on the stats, there's plenty of academic research on this topic and illustrative comparisons of different investment styles to support the buy and hold argument. Not having a go at those favoring a trading type approach, just saying statistically speaking -- and there are outliers -- some approaches result in more consistent outcomes and magnitudes of compounded returns than others over time.)

Different types of biases, anchoring in particular, can also affect decisions such as should I still buy now that a stock's been up 10x over the past year? Or I don't buy anything if there's not at least 10x upside over 3-5 years. While the latter may be an appropriate expected return (ER) hurdle to justify an investment in a micro and small-cap stock, it is important to relate the ER to a level of risk on the investment (among a number of other factors). For example, personally, I'd be more than happy to invest in a stock with a market cap of $50B if it could feasibly do 2-3X over the next 5 years as the inherent risk is likely substantially lower than investing in a micro or small-cap company. (Also, that return level would be a multiple of what is typically delivered by the broad market and average investor or fund manager over the said period using historical data -- relative context matters to assess opportunity costs correctly.) Likewise, it requires a lot less capital to go 10X from a $50M market cap vs. a $10B market cap company -- starting point specificity matters, a lot. And that's just focusing on the valuations assigned to a company which is not necessarily the same as focusing on the fundamentals required to justify such forward-looking valuations.

All of these point me towards being specific in assessing ER vs. risk vs. fundamentals vs. opportunity cost vs. my risk budget, etc. Every situation and every investor is different and the respective investment decisions taken by investors impact the price discovery mechanism of the market which we expect over a longer period of time to reflect the true value of a firm. That by definition means that at any point in time the price can over/undervalue the company which may be exploited, hence the opportunity for tactical decisions to add (or destroy) value. For the average Joe, that means it's (probably) best to determine where to place bets having a more long-term focused approach that, funny enough, would align more with being able to benefit from valuation expansion that requires typically years to really get going. Same with any real business which takes years to grow. We are still in the early stages with this firm regardless of the SP movement over the past 12 months when that's related to company fundamentals and potentially addressable market size both domestically and globally. Would buying shares are 10c or 30c still make sense? Yes, if the expected return vs. the risk considering company fundamentals, including your opportunity costs, etc. presents the best option available over the prospective time period. As always, investing and perceived value is in the eye of the beholder. Sometimes being myopic can be a real hindrance to compounding which by definition takes time. In my opinion, we are still in the early stage of this firm's life cycle so some of these worries are utterly misplaced. I agree with others that based on currently available information I wouldn't even consider selling any parcels until we are much closer to $1, and that even may be leaving a lot on the table depending on the remaining addressable market size and growth at that point. In that sense would I still buy at 50c if my upside expectation is at least 100% (and by now the company-specific risk is substantially less with a market cap close to $1B, fully diluted shares, etc)? In other words, double my money at less risk than I assumed when I bought shares at 0.5c? The answer is YES, but that's just me. GLTAH, DOYR.