A $60 Million Punt on a Potential 100-Bagger

A Volatile Bet with Billion-Dollar Dreams

When the potential upside of an investment eclipses the downside, you have what is known as an asymmetric bet. Nasdaq.com calls asymmetric bets “the holy grail of investing”, and many billionaires from Paul Tudor Jones to David Tepper ascribe their success to them.

You might risk $1,000. But instead of a ‘safe’ 10% annual return, with an asymmetric bet you might make ten or a hundred times your money. On the other hand, you might lose it all.

I’ve got an asymmetric bet for you today.

I chanced upon this company after hearing someone talking about it at a dinner the other night. I took a look at the chart and it is one of the most volatile charts I have ever seen.

In August last year it was trading at $1.50. Next month it was $7. By November it was at $3. Next month it was $10. Now it’s collapsed again and it’s at $2.60. We are back in the buy zone.

On chart action alone, ignoring the fundamental investment case for the company, it is one to buy on the dips and sell on the spikes.

But these kind of price swings are nothing in the context of the history of the company. Four years ago it was flirting with $100. It has since fallen by some 98%.

10 years ago it was north of $200. Boy, is it volatile.

I think it could go back to $200.

Never mind the chart, it is the investment case for the company that is compelling, particularly in this new inward-looking US economic environment.

On the valuation of its real estate and other assets alone, it is trading at about a third of its value.

But it has two businesses it is building, which could see the company priced back in the hundreds within five years.

This AMEX-listed company has a market cap of $60 million. I estimate its cash holdings to be in the $5-7 million range.

It has some 260 acres of land in Nevada - data centre country - worth $50 million, which it is selling.

Plus it owns a 17% stake of 2,500 acres of similar land nearby, worth another $50 million.

It owns a historical mining district spanning roughly 12 square miles with 600,000 oz of gold and 6 million ounces of silver, which it plans to sell or lease. What’s that worth? $50 million, I would have thought. ($50/oz for the gold, $3/oz for the silver).

So that’s $150 million of assets for $60 million.

Then it has two recycling businesses - one for solar panels, the other for biofuels - and this is where your eyes begin to water at the upside potential.

It has recently agreed two deals. One values the metals business at $110 million. The other values the fuels business at $700 million.

So we already have a valuation today close to a billion for this $60 million company. Never mind its future potential.

I’ve gone through some of the numbers and I am thinking, as the company grows, this could be a 100 bagger within five years. There is downside risk, of course, but that is minimised, by the assets it already owns

Let’s take a look.