Opportunity Costs vs Buy and Hold..... There are a few (and there will be many more) comparisons between Ultra (T.UP) Petroleum and HEG on other chat boards.
A few have mentioned the dreaded "opportunity costs" that occur when you climb aboard an eventual winner...(that is a key assumption in what follows)... a few years too early.
What we don't often factor in, is that Warren Buffet's simple maxim "buy and hold" works well because it incorporates the magic of compound interest.
As a stock matures, giddy profits spew forth along a steep exponential curve. This has an especially high impact in a compressed time period, during the emergence of successful juniors.
To illustrate, let's take two investors, both with $10,000 to invest. "A" jumps aboard Ultra two years ago today and gets 10,000 shares for a buck apiece. (check out the T.UP two-year chart)
"B" is more cautious and waits more than a year until hard news and "certain" growth spikes Ultra to $1.40. "B" gets 7000 shares for his $10,000. (we are assuming that "B" was astute/lucky enough to avoid pulling the trigger in September '99 when Ultra made a "false/positive" spike to $2.00.
Ok..so then Ultra begins it's real climb to today's $6.00 range. Investor "A" has $60,000 and Investor "B" has $43,000.
It is actually "B" who has incurred "opportunity costs" of $17,000 (170 per cent of his original investment)...unless, of course, he was able to get in and out of some other investment with a 40 per cent gain (including commissions) in the one-year period that "A" was investing "dead money".
To buy back into Ultra later than one year after "A" would require increasingly stellar gains in the alternative investment. The "opportunity costs" for Mr. "B" become exponentially greater as time goes on.
So there are a lot of "B's" on the Hegco sidelines today, who believe that Hegco will be a winner in the long term. They are waiting however for that hard news spike that will signal the start of a sustained climb. It's unlikely to be much different than the Ultra scenario..30-40-50 per cent in a few trading days.
At first glance it seems like a strategically conservative move to wait for Hegco's "spike day" as the signal to climb aboard.
But when you do the math, getting in early and living with "dead money" is the key to earning exponential interest.
For those loyal investors who have been in Hegco for several years now, (and have averaged down in the last year), take solace in the concept that (for an eventual winner), "dead money" is the key to "exponential growth". |
