InItEarly, Risks are fundamentals too
Maybe I need to be clear that Risk, doesn't just mean bad.
Understanding risk, is not just about knowing when to walk away. Its about knowing when to hold, or increase a position at a discount.
High Risk/High Reward is not only a cliche. If you have an understanding of the risks, you have a far better chance of claiming the rewards.
You use a metric for Tonnage/MarketCap, right? The one I often see is 10mt = 100mMC (for an explorer) That's part of the reward side of the equation, there needs to be potential value there, as there is no point in high-risk/low-reward (and low-risk / high-reward is a scam)
But do you use a metric for risk? (all the Brokers do, they analyze all the risks they can find, from the macro to the micro, give the risks a number, add them all up and apply it as a percentage discount to what they think the stocks fair value is. Bell Potters risk for LRS is currently 55% That is high risk. but it doesn't mean 55% chance of failure, no Broker is a fortune teller. Its not 55% chance of things going wrong. Its a 55% risk discount on the share price. It means any de-risking, should raise the SP in the same way as more tons should do.)
What are WR1's risks and what risk discount do you apply to the fair value?(taking into consideration that the 10mt=100mMC for explorers already has all most macro and normal exploration risk discount built in)
So say you think WR1 has a pretty easy chance of 75mt = 750mMC. Its currently trading at a 70% or so risk discount.
What are those risks?
Let me give an example:
For simplicity, lets just say the whole 70% is just for the road that Kevin is concerned about.
Then what needs to be done to begin the de-risking? maybe you could even divide it something like this:
-a clear timeline 20%
-permitting 10%
-budgeting 10%
-construction 20%
-completion 10%
Then decide on your risk profile and jump in as soon as it is met. So you still get at least some of the discount. The more risk you avoid the lower the reward. I prefer high risk/high reward in this case. I think it'll happen in a timely manner. I have no evidence yet.
But I have a feeling based on: Canada wants the lithium, Quebec say they gonna build roads, and as GortonGums just mentioned, patriot just built a road.
SO I am up for the road risk and if it pans out I get the reward because I bought more shares before it was built.
I dont think we need to apply numbers to the risks, I just want to discuss them.
I expect you know all this, or at least grasp it intuitively.
BUT every damn time I mention risk I get insulted and called a downramper with ulterior motives.
My motive is good discussion, informed fellow investors, who help grow my knowledge and don't run out the door at the first sign of trouble.
My motive is a mature forum where we don't insult strangers
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