Thought of the day: Return compounding is all about timeframes in #cyclicals, 10x over 5 years reinvested in 10x over 5 years reinvested in 10x over 5 years with 1-2 year waiting between reinvestment = 1000x over 17-19 years. Are you formulating your compounding plan?
Our working example:
$BTU from $1.21 = 13x < 30 months
deployed into:
$IREN from $1.32 = expect 10x over 48 months
deployed into:
Unknown at this time = 8x
Total return = >1000x
Documented is previous tweets
Why $BTU it was -98%, with a reasonable probability of a debt restructuring, coupled with quarterly cashflow that could move from $20m to $500m = 30x re-rate
Why $IREN is was down -96%, reasonable survivability runway, cashflow ability at $50k #Bitcoin would equate to >5x entry
@GjStocks An example: $WKT
At 10c it's 5-8x returner over 5yrs
At 5c it's 10-16x returner over 5yrs
So the lower the sp goes with unchanged core assumptions, the higher the return.
The vision required includes - successful project implementation and scalable production over 5yrs.
@Pedro82854342 What's falling to 15-20yr lows?
#preciousmetalstocks ??
If #lumber falls below $300, what opportunities will be available?
@GjStocks Why 99% won't be able to compound a portion of their portfolio at 1000x over 19 years?
- average holding period is 3 months compared with the 5yrs plus required
- very few have the emotional position to buy on -97% sales
- the perceived low risk near cycle tops
@SemiGodDevil The key for what comes out of the oven is 80% based on spot price for #cyclicals
#Bitcoin next cycle peak? US$75k-175K
#Uranium $95/lb average for the peak year? $AEE $FSY $WSTRF $EU
Expandable #graphite > $2000 basket price? $WKT
#Metcoal next peak year 2027> $400/t $CKA
Turning $20k into $20mil over 20 years is the objective:
1st asymmetric trade 20k becomes $220k
2nd asymmetric trade 220k becomes $2.4m
3rd asymmetric trade $2.4m becomes > $20m
How to pick your 1st asymmetric trade? #cyclical
1st -96-98% is fertile ground (market cycle bottoms offer)
2nd Mean reversion given cashflow reversion, look for where spot prices can 3-5x from lows
3rd Safer ground is where the sector behaviour is consistent over cycles
One niche example: based on #gold spot +50%, #silver +100%
#preciousmetalstocks
Nano caps <$20m with compelling possibilities at >$2500 spot
$GPR was a recent one 1-1.7c accummulation range
$WWI at 0.5-0.9c is on our watchlist @ $2500 spot project IRR> 70% & NPV>30x cap
@Peak_Ascent We would add that burning match #preciousmetal explorers are tricky beasts, they are not our preferred focus generally speaking. Too many are lifestyle cash burners for the CEO. Several are approaching extremely low historic valuations, so it would be remiss if we didn't zoom in
@deruyter1667 $IREN would have struggled to go bankrupt in the worst sector conditions, ie. if Bitcoin went to 8k.
At $1 was trading at 0.3x 2024/25 CF
Implied > 20x upside
Note how $IREN trades over the next 18 months as #Bitcoin achieves:
35k = $4.50-5.50 +4x return
70k = $14-16 +15x return
105k = $22-28 >21x return
#Energy is on the move....
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For our followers: Now that the sky has started it's fall and you have stocked up on dry powder as we have guided, the next step is to review watchlist entry points. It's key one moves to a Greed mode over the next 6 months as markets bottom, removal of Fearfulness.
Some massive compelling cycle bottoms will occur in such industrial commodities such as #lithium
Look for...
> 95% declines from peak
Cap < 3% of NPV
Cap < 30% of Cash flow 3-4yrs out
IRRs > 40% on $25k pricing
= > 10x returns
Don't be surprised if 2020 lows are achieved.
As retail investor become extremely fearful they will often sell out at extreme lows with no rational consideration for mid to long term value, historically this has presented our best entry points for >10x returns. This will assist in us selecting our last leg for 10x10x10=1000x
We note those calling for a material US market sell off in the next 3-6 months has increased substantially in recent weeks, what have we done 1H 2024 to cushion and provide multi options to take advance of this event:
A) We scaled back on >10 baggers trading on likely...
1/
.... non secure valuations. These include #bitcoin miners like $IREN, excessively valued #uranium stocks.
B) Dry powder is at 35%, & will go to over 50% on the current continued leg higher
C) Physical ETFs holding #gold #silver #bitcoin are included in dry powder
2/
D) Fresh asymmetric themes can decline a further 50% in a market pull back to -96/97% from peaks
E) Still looking for blow off tops to sell into prior to the major sell off this adds to dry powder
F) Often dry powder 10x by sitting in Cash & near cash Vs overvalued equities
3/
For our followers: Its the final June tax loss selling next week for the ASX
A few tips to guide your actions
a) #lithium stocks making new lows with credible IRRs, cap < 4% NPV, cap < 0.4x CF 3-4yrs out, controlled dilution = >8x returns
b) $AAU 0.3c = US$4m cap post raise
1/2
#Antilles has tripped massively in 2Q, can it recover materially 2H +1x? $4m legal claim and equipment sales. Project NPVs still US$200m
c) $AEE at 10-13c #uranium, hit by option conversion selling, material raise with negative sentiment and now tax loss selling, 2H +1x?
Our weekend will be spent on review of our 20 #lithium watchlist plays... 5 of these will to 8x within 36 months from current prices.
Look for > 50% IRR projects round tripping to last cycle lows
Cap < 0.4x CF 3-4yrs out
= > 8x returns
Bottoming process can take another 6 months, but compelling entry points to begin scale in are upon us.... remember 95% corrections with the above matrix look interesting for > 8x within 36 months.
More of our #lithium scale in bids were hit in the last 4 trading days then in the 3 prior months as round tripping to last cycle lows are coming into play.