My upside in these investments is that these companies sit on massive amounts of oil in theground in their unconventional acreage. If these companies (or any competitor) figure out howto get even 2% more of that oil out of the ground the upside to their reserve value is huge.For example one of my favorite companies in the sector is Petrobakken which has proven andprobable reserves booked (by an independent third party) assuming that 5% of the oil in itsBakken land will be recoverable. Petrobakken and the other main producer in the CanadianBakken (Crescent Point Energy) think that actual recovery factor in the Bakken will be more like25% to 30%.That means that Petrobakken, which trades below the PV10 value of its currently bookedreserves (assuming 5% recoveries) could quintuple its Bakken reserves over time.That kind of growth in reserves has to do good things for the share price over time.
m A Dreamer Too
My problem is I
m a sucker for a good story. You know what I
m talking about, those storystocks that could turn an initial investment into a ten bagger. The problem with those is that thedownside is often a zero if the story doesn
t turn out.What I
ve allowed myself to do so that I can have a little fun with these good stories is allocate asmall percentage of my portfolio into a
venture capital portfolio
. There is nothing venturecapital about this segment of my portfolio, but it shares the kind of risk/reward profile of venturecapital investing. The rewards for betting on the right story can be enormous (think tenbagger), the risk of betting on the wrong story can be a total loss of my investment.I
ve limited the amount that I
m willing to invest in these kinds of companies to a modestamount, but the theory that I have for this portfolio is that the big winners will more than offsetthe total losers, and the overall return for the portfolio should be pretty good.I recently came across a company that fits the bill for my high risk, high reward portfolioperfectly.
MGT Capital Investments Inc (MGT)
According to the company website, here is what MGT Capital does:
MGT and its subsidiaries are engaged in the business of monetizing intellectual property rights. MGT Gaming, Inc., a majority-owned subsidiary, owns intellectual property relating to casinogaming systems, and has plans to enforce its proprietary rights against possible infringers. Inaddition, the Company owns a majority interest in Medicsight, Ltd, a medical technologycompany with patent ownership, as well as operations in imaging software and hardware