20 Bagger Stock Blog
October 17, 2023
I would like this blog to be a general discussion on personal stock investing however, given the name of the blog I thought I would start with one of my better multi bagger stock picks. It wasn’t my first and I have had several since then but it was noteworthy for a couple of notable mistakes and takeaways.
Just to make sure we all know what I am talking about, a 20 bagger is a stock that rises 20 times over what you paid for it. It is a rare occurrence but a fantastic ride when it happens. A 10 Bagger is a stock that rises 10 times what you paid for it. It’s far more common than a twenty bagger but still a great rush. And a two bagger is when the stock doubles which is pretty good but not too noteworthy when is comes to stock stories.
Week 1 Pick a winner
This stock was called Royal Nickel (RNC) and was brought to my attention by my brother-in-law: Lou. He mentioned that he had read an August 27, 2018 article in the Financial Post about a company that had developed a revolutionary way of processing nickel. I read the article, did a little research on the company, and a week later bought 20,000 shares at $.08 per share for a cost of $1,600 plus the transaction cost of $9.95.
Week 2 Watch It Start to Grow
The next week I saw that the price had risen to $.16 per share so I called Lou and said I was selling half my shares to get all my money out and still own 10,000 shares to play with the house’s money. Remember, it’s only a paper profit until you sell.
Mistake 1- always find out why something is happening to the price of a stock.
I thought the price doubled because people were becoming aware of the revolutionary nickel process but it turned out that the company had a small producing gold mine in Australia called Beta Hunt that they were mining and trying to sell. After dynamiting a corridor underground, they came across a large nugget of gold in one of the tunnels. Had I taken the time to find out the why the price had risen so fast I might not have sold 10,000 shares then, but the logic was sound so I have no regrets. On September 10th, 2018 the Financial Post headline screamed ”Toronto miner unearths boulder that contains 9000 ounces of gold”. The mine was no longer for sale. Immediately there were pictures of the huge nugget they found and the stock price started rising. The mine normally produced 2-4 grams of gold per ton of rock but the recent find was found to have 2,000 grams per ton of rock.
Week 3 Accumulate
At any given time I usually have at least five or six penny stocks in my portfolio with 10,000 to 20,000 shares each. I choose these stock with a lot of care looking for stocks with strong growth potential (how I pick them in a future post). Once one of them starts to show momentum I add to my investment. Now was the time to add to Royal Nickel so I bought: 20,000 shares at $.27, 70,000 shares at $.28, 20,000 shares at $.37 and 15,000 at $.37 plus the original 10,000 at $.08 for a total of 135,000 shares at an average cost of about $.29 per share.
Week 4 Ride The Rush
On September 20th 2018 Royal Nickel announced that the Father’s Day Vein had produced 24,000 ounces of gold worth $38 Million which was more than double the 9,250-ounce estimate. Eric Sprott; a well-respected mining expert, who already had a position in the company bought more shares at $.42 per share to bring his share up to over 10% of the company to become an insider trader and the price soared. Now I’m checking the stock price on an hourly basis. My stock went from a two bagger to a six bagger. From someone whose only knowledge about gold was from a filling I had in a tooth, I suddenly became a gold mining expert and was poring over their posted results with a fine-tooth comb commenting to my fellow investors about how I thought the company was being conservative with some of their estimates due to blah, blah blah…. I started checking out other gold miners near the same location charting the direction of their veins, their grams per ton, their costs per ton, the depth of their finds, location of nearby mills to process their gold. Royal Nickel continued to announce new finds and to extend the size of the veins and the price continued to rise but now climbing less quickly. And then the price broke $1.00 per share and midday hit $1.10 before it closed at $1.04. I was a genius!!
Week 5 Sell Sell Sell
At that time, I lived in Alberta and the 9:30 am Stock Market opening actually happened at 7:30 am for me. After taking my wife out for a celebratory dinner the night before, we were still in bed but I automatically turned on my phone to check prices and saw that the opening price was down to $1.00, and I panicked, ”it’s just a penny stock, get the heck out” was the first thing that came to mind, so I laid in bed calling the investors I had recommended the stock to, telling them I was bailing out and then, still in bed using the phone, sold my full stake from the four different trading accounts I had bought in. The first third I sold for $.99 per share: 12.4 times what I paid for the original purchase. In the ten minutes it took to complete my sell off, the last transaction was done at $.93. When playing penny stocks, it doesn’t really matter what the amount of the investment was but what really counts is the rush you get when it goes up five, ten, or twenty times what you paid for it.
Mistake 2 – never fall in love with a stock.
So, did the story end when I sold out my holdings? Of course not, I had invested too much of myself into the company to just let it go. After the initial price drop it declined for a week or so and then stabilized and held firm around $.80. ”Aha”, I said, “the panic is over and things will start to go up again so I better get back in” and I did, although not with as much as I sold. After a short rise it started to go down so I sold at a loss until it stabilized again and I bought until it went down and I sold at a loss and on and on and on. The end result was that I made pretty good money on the stock but not as much as I did on my initial sell off. I ended up selling the last of my stock at $.75 per share: 9 times what I paid for the original buy. There is no point ruining a good story by hanging on too long and turning a great buy into an average purchase. On Micro caps (penny stocks), when you find a great one and make 5,10, times or more and you sell out. STAY OUT.
Take away 1 You can always find other stocks at the start of their run rather than continuing to buy at the end of a run.
Epilogue:
Eventually, In June 17 2020 Royal Nickel changed their name to Karora Resources Inc. to better reflect the gold mining nature of the company and began trading under the symbol KRR. On July 30, 2020 the company announced a share consolidation where they turned 4.5 pre-consolidation shares into 1 post-consolidation share at a price of $2.25 which was equivalent to $.50 a share pre-consolidation. The company currently trades for $3.85 per share ($0.86 pre-consolidation) as at October 9, 2023.
The above chart dated July 21 2023 is showing post consolidation prices but clearly illustrates the great gold rush in September 2018.
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