MENU

My High-Risk Play With Monitise Plc, Rare Earth Minerals PLC & Sirius Minerals PLC Would’ve Been A Losing Bet

Four months ago I toyed with adding a troika of high-risk stocks into my portfolio, which was becoming top-heavy with FTSE 100 blue-chip dividend machines. I convinced myself that adding a few potential multi-baggers might help turbo-charge my returns and make my portfolio more interesting to look at.

I told myself that investing in just one risky stock was dangerous, it was safer to invest in THREE instead. If only one fulfilled its potential, it could more than make up for losses elsewhere, I reasoned. I called it my 3-way high-risk play. While four months is too short a time frame to assess the performance of most stock choices, it makes sense with these three, because a lot of happened to them since then.

Off The Money

When I toyed with investing in Monitise  (LSE: MONI) on 20 April, it traded at 13.5p. At the time of writing, you can buy it for 5.25p. So a braver man would have lost 61% of his money. This has only continued the 30% slide the stock had suffered in the weeks before I considered buying it.

I was tempted because although the company couldn’t find a buyer, it could still boast a rollcall of top clients, including Santander, MasterCard, IBM, Visa Europe and RBS. Unfortunately, Visa Europe, announced last month that it would be steadily cutting its shareholding from today’s 5.3%. The news came fast on the heels of a cut in revenue forecasts, although chief executive Elizabeth Buse said the company was still on the right track to profitability. 

Crashing To Earth

As is Rare Earth Minerals (LSE: REM), down 25% in four months from 1.19p to today’s 0.91p. Over the last year, it is down 42%. Last time I looked at this stock investors were waiting on the results of its pre-visibility study at Yangibana, a joint venture project in Western Australia with Hastings Rare Metals (REM has a 70% stake).

We are still waiting, although a study published earlier this month confirmed continuous mineralisation of more than 0.9km in Yangibana North, which is promising. REM is still a shot in the dark, as its planned lithium mining operations have yet to grind into gear, but looks more potentially rewarding than Monitise right now.

To Sirius, With Love

At last — a winner! At least for now. Sirius Minerals  (LSE: SXX) is the winner of my three-way play so far, rising 33% from 12.75p to today’s 17p. It enjoyed a one-off boost in July, when the North York Moors National Park Authority gave it the thumbs up to construct the world’s largest potash mine.

The stock subsequently suffered a sell-off as traders pocketed their profits because they knew that Sirius has a long haul ahead of it, as management works to raise the £1.7bn needed to drill a mile-deep shaft and 23-mile long tunnel to transport its high-grade polyhalite deposits to Teeside for export.

Good news is trickling in, however, with recent reports that it has upgraded its take or pay supply agreement with a Fortune 500 US-based agri-business customer to supply of 500,000 tonnes per annum of polyhalite for five years. This is one stock that cannot be judged over four months, it needs at least four years. I’m happy to give it time.

With these three stocks, the risks outweigh the rewards right now. Mind you, the FTSE 100 hasn't exactly dazzled in recent months either.

If you want great growth potential but with a little less risk, this might tempt you. The Motley Fool's Head of UK Investing has pinpointed the 1 'under-the-radar' pharmaceutical stock with blockbuster potential.

The stock has already delivered a strong return and our top expert believes there could be more to come. In fact, he reckons it offers investors potential upside which may be as high as 45%!

To find out which stock we consider one of the best small caps in the country, simply download our brand-new wealth report. It is free and without obligation, so click here now.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.