the upside, page-18

"Oh yes, I forgot to mention that there is a 12 month price analyst target of $282 on Blackmores.

Others including myself have said that MSB is an emerging blue chip, yet some in here don't want this to be said. We need to use our intelligence here. Not every investment decision should be based on total certainties or you will be paying a premium and be behind the 8 ball. IMO."

Your upholding of Blackmores (BKL) as a comparator for MSB is a somewhat curious one, but I'm glad you make it.

Because a BKL case study talks succinctly to the very issue of risk reduction through investing on the basis of funding adequacy to the point of self-sustaining commercialisation.

For you see, BKL has been around for something like 80 years; it listed in 1985 if memory serves, and it has - for as far back as I have been able to locate financial statements - generated surplus capital since 1997.

BKL's Surplus Capital Generation ($m)
(Operating Cash Flow less Investing Cash Flow)

1997: 8.6
1998: 2.4
1999: 5.7
2000: 7.0
2000: 2.4
2001: -2.4 (Complete replacement of IT platforms and systems)
2002: 3.9
2003: 6.6
2004: 5.7
2005: 9.5
2006: 10.9
2007: 9.2
2008: -8.5 (Purchase of land and construction of new facilities in Warriewood (~$35m)
2009: 3.8
2010: 20.4
2011: 16.6
2012: 17.3
2013: -21.2 (Acquisition of BioBeuticals for $39m)
2014: 3.2
2015: 68.0

Over that review period, BKL generated a cumulative Operating Cash Flow of $340m.

Of this, it put $140m back into the business, including $75m for the acquisition of BioCeuticals, as well as the company's new manufacturing and distribution facilities.

Notably, over that time, it raised just net of $3.6m via the issuance of new shares, a figure that was dwarfed by the $215m of dividends shareholders received over that time.

Unlike MSB, BKL hasn't had to depend on the kindness of strangers for its funding for decades, and it hasn't raised a cent of capital from its shareholders for the past 11 years.

Now that's what I call "blue chip" financial pedigree.

And not just recent blue chip pedigree: it has been that way for years.

I'm sure that BKL was at one stage of its life, just like MSB, "emerging" as a potential blue chip.

But once it reached that blue chip status - and even for many many years after it became "blue chip" - you could have bought the shares and still made a phenomenal profit.

As the share price attests, certainly no "premium" would have been paid from "behind the 8 ball" even if you had waited for many years for the company to reach the point of commercial self-sustainability.

You sure didn't have to buy it when it was still "emerging" as a blue chip; quite patently, you could have waited until it was well and truly established as a blue chip before you bought it and you would still have created significant wealth for yourself. (Similarly for a whole raft of today's listed blue chip companies.)

And, importantly, you would have done so without taking on any risk whatsoever that the company might possibly not becoming a blue chip, for whatever reason.

I'll buy a stock like MSB when the downside risk from the company not being able to fund itself to commercial self-sustainability is out of the way.

But if you are happy to take on that development risk, and the attendant dilution that invariably goes with it, then good luck to you.

Me, I prefer to wait.
As I do.

Horses for courses.