If they’re honest, most people would like to have a go at being rich. That’s why millions of us do the National Lottery even though the chance of winning is a vanishingly-thin 14m to one. It could be you, but almost certainly won’t be.
Less of a Lottery
Don’t let my cynicism put you off from buying a lottery ticket, just make sure you back this up with a more sensible plan just in case you don’t win, such as investing in stocks and shares.
Now the best way for most people to start is building up a balanced portfolio of shares and funds. Kevin Godbold has a few starter tips here. Once you have a nice spread of stocks, particularly dividend-paying blue-chips, you can start to take on a little bit of extra risk at the edges, in the hope of generating a superior return. That’s where stocks like polyhalite fertiliser miner Sirius Minerals (LSE: SXX) come in.
Taking a risk
You shouldn’t bet your house on it, but once your portfolio is ticking you might want to find a place for one or two stocks like this. While hugely popular Sirius hasn’t lived up to its billing so far, its stock has fallen by a third in the last six months, in part because its costs have overrun.
This is a long-term play that was destined to go through long spells of unfashionability such as the current one. It was always going to take the best part of a decade to get all the necessary approvals to dig a mine deep under the sensitive North Yorkshire Moors and build a 23-mile tunnel to transport the potash to export facilities on the coast at Redcar.
Crucial juncture
That’s a tall order with no profits due for years, as it means means scratching around for billions worth of finance while existing investors worry about a fresh rights launch that could dilute their holdings. Anyone who thought this was a get-rich-quick stock didn’t read the prospectus.
However, Shore Capital has just examined Sirius and held out the hope of some positive news in the months ahead. Its analysts reckon the group is nearing a “crucial juncture” as its $3.6bn stage two financing should soon be completed, if all goes to plan. It describes this as a “seminal achievement” that could trigger “a major re-rating of the shares.”
Up and down
It will still take years before the cash starts flowing but the risks should slowly reduce, Shore says. If it’s right then it’s just a case of being patient and waiting for Sirius to start fulfilling all those long-term fertiliser contracts it has been busily signing with companies all over the world.
Sirius has a habit of spiking on good news. I have always argued that the best time to buy this stock is when it’s in the doldrums, news flow is thin, and investors are losing interest. This is exactly where we are now. Make sure you’re comfortable with the risks though.
