Probability vs. Risk vs. Reward
Evening again Grayhairs!
Thanks again for your generous sharing of ideas.
I just wanted to point out an issue we have with probabilities (all theoretically). In order to get a 15X profit in KOB, we need to prove up 8tcf. As you have pointed out, it is not scientifically possible to quantify a deposit of 16 TCF until the pool has actually "produced" 1.5 TCF. Therefore, for the immediate future it is outside the realm of probability that they will "prove up" a 16 tcf deposit, Based on this, I would guess that proving up even 8 tcf within the next 12 months is AT LEAST a 15-1 shot, if not higher (probably much higher, right?).
Therefore, for KOB, we may have rather even odds of going either 15-1 or 1-15. Both are not likely, but perhaps having a similar probability.
15-1 odds for a 15-bagger is "fair" odds. Naturally, this is all just playing with numbers, but I think that given the risks/rewards, these plays look to be rather "fairly valued."
On ther other hand, should some big (if not temporary) problem arise and KOB go back to the pennies,I personnaly think that would be a good time to scoop up a truckload.
Just my 2c.
Thanks again for sharing your wisdom.
THC |
