The 100 baggers are among us. Some are pure luck that are unpredictable. Others have many and sufficient clues for all (trained) to see. I would say 50% unpredictable (only unpredictable usually for the first few bags) and the rest predictable.
What constitutes an experienced and an unbiased analytical approach? I am offering my experience with my large initial holding in FMG , which I relinquished too much too soon, so that we can all get some take away lessons.
In brackets I will have letters (L1) (L2) etc indicating important lessons as take aways for me. These can be the subject of discussion by anyone later.
Around 1994 (+ or a couple of years ), I purchased shares in a gold company Pharaoh resources run by a………………….. (L1 very successful and innovative and visionary geologist …………. , MohamedEl-Ansary. Thisdescription was not just jargon from a bio but real innovative and successful previousroles/projects. As well as proceeding with some mobile plant innovation and drilling certain tenements , outsideof the main game, he purchased a ………………. (L2) verylarge asset at very low price…………….. This was an out of favour, iron ore deposit in the middle of nowhere, the Mt Nicholas deposit (WA) . It was then valuedat $300m at as I remember $5 per ton in the ground but purchased for $1 or $2m roughly. Iron ore prices were very low and one needed a very expensive railway and probably a port to monetize it.
The internet boom came during a time when commodity prices were very low. The company went into fund raising difficulties. It was renamed Allied Mining and Processing Ltd, after more difficulties it briefly converted to an internet company or rather a resources company with an internet arm, while holding on to the assets. ………………….. L(3) Often big ventures begin around a shell with a hidden asset……………………. This company now effectively a shell (in which I topped up),
I was holding a stake of about 1m (800k my own and 400k family) in Allied Mining. Shares that were gyrating between 5 and 20c. FMG did a deal with them and I believe injected some $70m. I ended up same number of shares in FMG. To put it in context, after the 1 for 10 split, my parcel then, if held in its entirety , these would be worth $180m today.
FMG was the vehicle through which a bunch of visionary entrepreneurs , Andrew Forest perhaps the least important person among them at the time was included as it was felt that he alone could get access to overseas capital needed …………(L4) The ability to raise money for big start ups is of critical particular importance. ………….. This is what Andrew Forest key attribute at the time.
The team was enthusiastic to deliver on a dream, which was based on years of observation, that there’re were many not so rich but some rich iron ore tenements that were too big and risky to handle as one had to …………(L5) take on the majors head on at an opportunetime. …….. . They had a…………….(L6) Big bold plan ………………..to create the third major after BHP and Rio in the Pilbara and surrounds. Theyhad calculated that they had ………… (L6) the macro forces with them for the next few years. This was very important in commodity price drivenventures as I understood at the time. These macro drivers included the huge demand for iron ore coming from an industrializing China, and lower grades being acceptableby the Chinese steel mills. …………….. (L7) They caught the majors and industry insiders unprepared……………………… to take them seriously and largely unable to effectively fight them. The majors had not pegged ground around them as they thought that the barriers to entry would be too high for any one else to bother.
Upon reflection their ……….(L8)……real strategic plan was not written in any of their announcements. ……………….(L9) They lied low but moved fast…………..they went at record speed pegging a lot of ground. The original Mt Nicholas deposit was a very small part of the ultimate ground pegged………………….(L10) such was their enormity of the task that industry pundits and analysts at first dismissed them and would not fund them.
If I remember FMG was injected with up to $70m. ……………… (L11)Start ips of this magnitude needed serious money to kick start. I did not realise it at the time but the…………… (L12) ability to raise capital and the necessary story telling is so necessary in growth ventures. It was a was key to FMG progressing. This is where Andrew Forest was at his element. In fact the US Falcone group that lost a couple of hundred million through junk bonds in Anaconda where twiggy was CEO, were first major group that backed him with much larger numbers (>$1b as I remember). I was to later learn that ……………. (L13) Media and public opinions of characters is not necessarily accurate nor their previous failures necessarily bear any critical guidance entrepreneurs perform next. I have since realized that…………… (L14) It is more important that companies are led by doers (better the quite ones than loud) than contemplators and deep analyzers. What I also learnt was that the ………… (L15) Widely held assumptions about what it takes to succeed are not cast in stone and it’s the innovators and the pushers who are the first to benefit from industry change.
I was sitting on my shares at around 20c for about 1nyear to 18 months, while bombarded by friend and the media about not trust Andrew Forrest. This included including from a former close employee of him. What I learnt from him was that he talked up announcements almost beyond the facts. He presided a rise in sp for Anaconda from a fre cents to almost $5 and back again. Anaconda was a Ni laterite venture with Cuban processing technology. In retrospect I have since learned that design changes were imposed by the board for cost cutting which made the plant inoperable. I am convinced that he was not the reason for Anaconda’s failure.
My first selling was at 96c (before 1 for 10 split). This was based on a charting insight (?) that $1.00 would be a major resistance level. I had 4 bags , not too common for me then and the thought of company failure was very real. My mistake I did not realize the……….(L16) NEED FOR A HOLDING PLAN so as to re purchase. I did not have a clear notion of how many shares I would keep at the potential uptrend.
……………….L17) There was nothing in any TA analysis that could tell me that I had a potential 100 bagger in the making………..(L18) If you look at a 100bagger chart, over a typical 3 to 6 month period, whilst its happening, it does not seem any different to most other chart. It is only when you see it over a few years that you see that you have a multi multi bagger……. This is an important point to note that………………(L19) Multi baggers cannot be predicted by the charts.
At that time I was starting to discover the merits of technical analysis.. ………….. (L20)It is a bad move to mix FA and TA when you first learn one or the other. ………..L21) Such ,mixing comes with experience.
After having sold a good portion of my position , as luck would have it the price retraced back to around 35c. I remember wanted to buy my order back. I had an order in the system at 34c (or 33c and missed it by 1c. My attention was drawn to other possibilities. I did not chase the stock up. I chased TA trading or other FA trading at the time. A major Lesson I learnt, …………..(L21) Do not make major changes to your portfolio by chasing greener pastures. ……….(L22) Always research what you are selling do not value it for what you gained. Throughout the first first year of the breakout I did not spend anywhere near sufficient time properly researching the aims of the company. Although I used to ring CEO’s regarding my other holdings I thought that this company was too big by now to be discussing their fortunes with me
For the same reasons I sold a good portion of my remaining position around $2.70 (pre 1:10 split.
Major Funding for the venture I think happened around $5 to $7. During this time it was hard to keep the faith when ASIC chasing twiggy about calling contracts with the Chinese firm binding contracts when under Chinese law they were not. …………….(L23) Often the establishment wants retribution on legals. This does not necessarily have any bearing on commercial facts. Most analysts still considered it a high risk venture.
Between $4 and $10 I had kept only about 100,000 shares. I remember that in social media I was involved with, we had a group going and we would always share the best 3 tips for the day. I would always include FMG but because Nobody purchased it (L24) ) “it had risen too much” neither built on my position , nor anyone else buy much if any. ………….(L25) Always a bad move to look at a chart and refuse to buy because it is sky high. Small retraces offer good opportunities and there are many.
To cut a long story short I could not handle the risk with so much on the table. Many analysts were still predicting it would fail. Sold nearly all at $18 . Kept some to $11 after split ie $110.
On a further post I will elaborate on the 25 25 lessons .
I will start you off. But please contribute;
Main lesson learnt for
(20min delay)