Thread by @BULLReturns

Thought of the day: Calling yourself right when the return horse race is not past the 500 metre mark is premature to say the least. The extremely negative rear vision mirror often turns into 20 baggers. Knowing the difference is the key.

Top to bottom of high cyclicality situations are often -95% plus....

Bottom to Top of the most misread cycle bottoms can be >30x...

The closer to bankruptcy, the lower the cap near the cycle bottom, the higher the cycle return.

$BTU 80c to $40?
$RIG 65c to $20?

A startup turnaround in a peaking #coal market is a great case study to cut ones teeth on: $AHQ

Cap < $20m Vs Full NPV potential in 5yrs of > $2bn

Bleeding cashflow, looks terminal, can mgmt turn this around in the next 3-4 months?
- Dilution likely to extend the runway

Outcomes:

A) Bankruptcy = 100% loss

B) Turnaround optimization at high dilution = 4-8x upside < 1.5c entry

C) Turnaround optimization at low dilution = 15-20x upside < 1.8c entry

D) Turnaround optimization with no further low priced dilution = 25-30x < 1.9c entry

Given this is not a traditional cycle bottom, but a higher risk turnaround (near a cycle top).

We rate above outcomes as follows:
A) 30%
B) 40%
C) 20%
D) 10%

We are looking closing whether we can observe a move to positive margins in the next 3 months, then we will triple up