My own portfolio is largely made up of solidly high-yielding FTSE 100 stocks and cheap trackers, as I aim to get richer slowly and steadily.
But I’d argue every sensible investor needs a bit of excitement as well, to inject a bit of colour and variety, and to keep your interest alive.
The odd four or five bagger can turbo-charge your portfolio, but you have to choose wisely, and avoid putting too much risk on the table.
Rapid Earth Movement
Some of you may have invested in AIM-listed insurance outsourcer Quindell or mobile money specialist Monitise for exactly that reason.
Both have been much in the news lately, and heavily traded, but another risky business seems to have dropped off investors’ radar.
If you had invested in Rare Earth Minerals (LSE: REM) two years ago, you would have a mighty fine nine-bagger on your hands, with the stock up 911% in that time.
In recent months, it hasn’t done so well.
Today’s price of 0.9p is well below down from its 52-week high of 2.06p. REM looks cheap, but is it a bargain?
Medium Rare
Investing in Rare Earth Minerals is rather like buying thin air. Although it has a strong track record of finding rare earth deposits like the highly-prized lithium, it has been slow to mine and produce the goods.
This makes life difficult for investors, because it means no revenues, no profits, no earnings per share data, and no price/earnings ratio or PEG, making the company very difficult to judge by conventional metrics.
Worse, there is frustratingly little news, with the gap inevitably plugged by speculation. This leaves the stock open to bursts of sudden volatility, often based on very little indeed.
Last October, investors got excited over its one-third stake in a new lithium project in Mexico, mineral being in high demand.
There was even talk of a tie-up with US electric car company Tesla, but that has now gone quiet.
Feasible Fun
Soon after, the stock had another adrenaline shot, after announcing a pre-feasibility study at its Yangibana Rare Earths Project in Western Australia.
Yes, that’s it, a pre-feasibility study. Any revenues from the project are clearly a long way down the line.
Yet that was enough for Rare Earth Minerals to raise a few million Australian dollars through share issues, and it will have to keep pulling the kind of trick, until it finally digs up some revenues.
Penny Dreadful
Rare Earth Minerals is looking to build a diversified portfolio of lithium and rare earth element deposits. As well as Australia, it also has extensive exploration programmes in Mexico, Greenland and Nevada.
This is the kind of company that could one day hit pay-dirt. Or it could just bite the dust.
It is also the type of stock you should buy when it’s down, which it is right now, falling 50% in the last six months. One piece of promising news could quickly reverse that.
Or maybe enjoy triple the excitement by spreading your bets between REM, Quindell and Monitise, in the hope that at least one hits the jackpot.
Only one thing is certain: it won’t be boring.
