10 Bagger Club Report 2022: Annus Horribilis

The overly accommodative government monetary policies around COVID, led to an “everything bubble” which made picking ten baggers in 2020 and 2021 a bit like shooting fish in a barrel. In those two years we called 14 stocks or cryptos that 10 bagged or much more.

But, that seems an eternity ago now. The excessive cheap money began to fuel inflation and in 2022 governments worldwide began tightening and pulling the money back in, and now the party is over, indeed we’re in the midst of the hangover period.

The fear of fiscal tightening caused global equity markets overall to lose 25% on average in 2022. Making it the worst year for equities since 2008. However, because the bond markets also fell hard, wiping out trillions more. 2022 now takes the biscuit as the worst ever year on record for wealth destruction. The property and commodity markets also fell, but the worst hit was the crypto markets, which suffered a very extreme vaporisation of USD billions.

This wealth destruction has had a significant impact on everyone’s finances and risk appetite, and is drying up the more speculative funds available to the ASX junior market where we usually find most of our 10 baggers. So finding 10-baggers has gotten much harder recently.

The secret to ten bagging is not just to try to make hay while the sun shines, but just as important is to be prepared not to lose too much when the worm turns. Fortunately, we managed this last year as, unlike most other asset managers, our ten-bagger and multi-bagger portfolios still managed to stay in the green overall, using both our highest gain and mark-to-market measures. The difference in the two measures are: Let us explain about the two measures we use:

Highest Gain

Measures a stock’s performance from the start of the year or its call date to its highest subsequent price that year or until the suggested exit price. This measure shows what our more active trading members could have gained from each call.

Mark-to-Market

Measures a stock’s performance from the start of the year or its call date to the end of the year or until the suggested exit price. This measure assumes that a member simply holds the stock based on the club committee’s buy or sell suggestions.

By using both measures, our club committee tries to provide a full picture of the potential gains (or losses) that members could or should have made from our 10 bagger calls, both by those who trade more actively and successfully and those who choose to just follow the committee’s suggestions.

Our 2022 Overall 10 Bagger Portfolio Performance

Last year, our ten-bagger equity portfolio, consisting of 16 stock calls, made an average gain of 98% on a highest gain measure. And 12% on a mark-to-market basis. However, after factoring in our three crypto calls, which fell by an average of 37% in 2022, our overall 10 bagger portfolio of 19 calls in 2022 showed an average gain of 25% on a highest gain basis, and only 4.5% on a mark-to-market basis.

No calls in our ten bagger portfolio ten bagged last year. Our best performer LIN.ax went up 550%, however, previous 10 bagger call – MEI.ax – ten bagged last year, to the benefit of those members who had chosen not to sell before.

Our 2022 Overall Multibagger Portfolio Performance

Our multibagger calls consist mainly of somewhat less risky, more brownfield growth-oriented stocks, many are chosen by members, out-performed our more volatile 10 bagger calls last year. It was up 99% on a highest gain measure and up 23% on a mark-to-market basis. Two members’ calls from 2021, MAY.ax and MAYO.ax (Melbana Energy and its listed options) which were in our multibagger portfolio last year, also ten-bagged early in 2022.

Summary: Our Performance Since Inception

Over three years, since our club’s inception in February 2020, we have made a total of 37 ten-bagger calls, which together have made a highest gain of 1,318% on average.

Of these 37 calls 14 (38%) have 10 bagged or much, much more. Only eight (21%) fell lower than the price we called them while they were in the portfolio. The balance of our calls also gained, and some handsomely, but by less than 900%. (For more details, see our overall performance page on the website.)

To the best of our knowledge we still don’t know any other manager or stock picking group who has performed better! Our hundreds of members have watched and participated in this and continue to, especially as we are already arranging some very promising cheap new pre-IPO deals for 2023. To learn more about them and to get in early, you need to join the club

Our 10 Bagger Calls in 2022

Our Uranium Calls

Last year the uranium bull market reversed like most other markets, but despite this tiresome and rather painful setback, we still hold our fundamental belief in uranium stocks and the Uranium bull market theory longer term.

Nuclear power is gaining traction worldwide as the only both clean and reliable source of baseload power. In 2022, there were 442 operational nuclear reactors in the world , with an additional 54 under construction (mainly in China) and 321 more currently proposed. .

But the nuclear industry seems to be facing a uranium shortage. Last year the world consumed almost 200 mlb of uranium, but only produced 130 mlb. This has been the case for several years now and the previous oversupplied global stockpiles since the Fukushima disaster, are now almost evaporating.

One main reason for this shortage is the cost of production. Most potential producers require to sell uranium around USD 75-80 per lb at least to be profitable, but today, the price is only around USD 50 per lb. This has led to a lack of investment in exploration, development, and production of Uranium resulting in insufficient new supply.world shifts away from fossil fuels towards cleaner sources of energy

As the demand for nuclear power will increase. This, coupled with the limited supply of uranium, is likely to result in a significant price increase in the near future, hopefully in 2023.

Deep Yellow | DYL.ax

A well established tier-1 global uranium company near to production with assets in Namibia and Australia - last year DYL took over Vimy Resources giving it one of the largest potential resources in the world. It has experienced successful management and is targeting 10 mlb of production to start in late 2023.

92 Energy |92E.ax

A speculative smaller explorer working in a good part of the Athabasca Basin in Canada and having had some interesting drill hits in the last years. These smaller exploration companies with at least something in the ground have traditionally run the hardest in the last two uranium bull runs.

Aura Energy | AEE.ax

Holds a big uranium resource in Mauritania that can be very cheaply mined, it also holds huge vanadium and uranium deposits in Sweden.

Elevate Uranium | EL8.ax

Has huge uranium resources in Namibia and Australia which, we calculate, is the biggest in the world in relation to its small market cap of just USD 65 million.

Okapi Resources | OKR.ax

This smaller start up is another very speculative play but it holds significant uranium assets in the USA which has almost no uranium production today but is one of the world’s biggest nuclear power users. The US government is encouraging development so this stock could run well in the hoped for coming bull market.

Our Speculative Exploration Calls

Investing in junior exploration companies prior to drilling is very high-risk. Usually, as these companies go into drilling stage, there is a speculative run-up in the stock price. This provides an opportunity for investors who buy in early to sell some during the run-up to mitigate their risk or to recoup the initial investment, and then let the balance of their free shares ride.

The depressed market conditions of last year however, made this strategy less effective, as speculative pre-drilling run-ups were weaker across the board.

Most exploration drilling turns out to be unprofitable, but when some such small companies do hit something promising - the potential returns can produce 10 baggers.

Errawarra Resources | ERW.ax

This small company is targeting nickel in Western Australia. Its tenement adjoins Azure (AZS.ax) which hits nickel on each drill hole and it is also prospective for lithium and rare earths based on hits in its surrounding tenements.

Ragnar Metals Options | RAGOC.ax

Another small company in WA has some prospective nickel and copper tenements but its drill program last year was only so-so. We called an exit on this speculative option during the year with just a small gain

Our Industrial and Pharmaceutical calls:

Industrial and pharmaceutical stocks tend to take longer to develop than resources stocks, but if well-managed they can also produce 10 baggers which can keep growing:

K-tig | KTG.ax

This company has a revolutionary new welding technology that saves around 95% of the time and cost of a human welder. Its potential uses are enormous from the defence industry, nuclear decommissioning to shipbuilding, pipelines, oil and gas, water filtration, hydrogen storage, and aerospace.

Despite good actual business progress last year, the stock price got driven lower when one of its major holders – a tech investment fund had to sell out aggressively for its own internal reasons. With patience the potential gains from this well managed company are massive even if just one of its many potentially transformational businesses are secured.

Firebrick Pharma | FRE.ax

Is applying for and developing licences to start global distribution and sales of a simple clear iodine nasal spray proven to work against the common cold, the flu virus and also Covid. When fully licensed, the potential here is massive.

Our Natural Resource Developer Calls

These junior developer stocks are where ten baggers are most often found - either by making good headway to production or by getting promising new projects injected into them.

Industrial Minerals | IND.ax

There is a growing glass shortage in the world, and the price of silica sand for making it keeps rising. IND is the most progressive of the ASX listed silica sand companies whose sand is now much in demand in Asia where most glass is made and used.

IND stockyard project in WA: silica sand is running out globally and particularly in Asia. Australia is the nearest place with an abundance of it.

FRB Firebird Metals | FRB.ax

This tiny company holds a huge manganese resource in WA. High purity manganese is in great demand for EV batteries and there are very few stable supply jurisdictions for the big EV battery makers to rely on supply. The problem is the market realised last year how much capex this small company will need to raise to progress.

Lindian Resources | LIN.ax

This small listed shell company suddenly had a huge proven rare earths project in Malawi put into it and the share price jumped by almost 500% from its lows. The whole world is fighting for access to rare earths now as China currently dominates the market.

Our Crypto Calls

In 2022, the cryptocurrency market got its teeth kicked in, and some spectacular collapses wiped out a further USD 750 billion dollars. Among the casualties were Luna coin, stable coin USDT, 3 Arrows, Celsius Networks, Blockfi, and Voyager. Bitcoin, the king of cryptos, lost 66% and most other coins fell between 60-80%.

Ethereum

Also fell 60% last year, fortunately, we suggested to sell early in the year and just took an 11% hit in the portfolio.

Terra Luna

Unfortunately, we didn’t suggest a sale of our Luna coin position call early enough and went down with the ship in its sudden collapse in May 2022! We had first called Luna coin a year earlier at $4 in May 2021 and by April last year - at 120, it was almost a 30-bagger and then Kazoom down it crashed in three days to almost zero! Some members had sold out on the way up or sold out before the crash and made fortunes, most others who didn’t and lost most their investment in Luna

CCC Cross Chain Capital (CCC)

This small coin was part of the Crabada game and for a bit of fun some members wanted it called as a potential 100 bagger in the middle of the speculative rush in late 2021. We only booked it as 25% of a call and told members to invest just a little as it was extremely speculative and high risk - but with a market cap of just USD 2 million at the time we called it we stated it could go up 10,000% or crash to zero. Unfortunately It wiped out to almost zero but we called a sell before it wiped out completely.

I Synergy Group | IS3.ax

This little known ASX listed micro-cap stock is producing a blockchain rewards system, but more importantly it is involved with the development of L1X blockchain which looks like one of the most promising and innovative new Layer 1 blockchains coming to the market.

The Outlook for 2023

Global fiscal tightening periods, after such a huge cheap money party won’t happen quickly, and they usually don’t end well. So we expect 2023 could be at best another fairly flat year - that could see some further nasty falls.

With everyone now feeling poorer, there is also far less loose money to speculate in the junior end of the ASX market (Australian Securities Exchange) or crypto which is where we mainly go hunting for 10 baggers. Most stocks will probably just undulate along broadly flat or gradually down and not rally much - even on good news - as that’s unfortunately how it is in these hangover periods. This does not mean they are bad businesses, just that neither the normal aggressive investment appetite, nor the capital, is currently available for excessive speculation.

But rest assured, such tightening markets do end. And when they do, often soon after some banking, institutional or equity crashes, then governments usually cave and again adopt a more accommodative fiscal policy and… off we go north again! We don’t know when the bottom will come.

Therefore, in 2023 we intend to reduce the number of our 10 bagger calls as we believe it has become substantially harder for stocks to 10 bag in such bearish circumstances (but it’s still far from impossible - 10 baggers still happen in bear markets, but are just much fewer and further between).

Therefore it will probably be advisable to keep more cash available next year, or hold some gold which tends to fare best in the worst times.

Holding bigger cash positions can feel silly in a high inflation environment but it does allow you to take advantage of any bear market opportunities that may suddenly arise.

The 10 bagger club committee has experienced difficult times in the junior ASX market (and other markets) like this before, and we have found that at such times going into seed capital and private deals is usually a more profitable way to go. Why?

Because getting in at the very bottom of deals such as pre-IPOs and private equity in a bear market may seem a bit riskier and less liquid, but it can greatly increase one’s upside and chances of achieving ten-baggers when things improve. It also helps mitigate downside risk if things continue to go poorly or get worse.

Conversely, current market conditions make it harder to trade very profitably, and there is an increased downside risk of either getting caught in unexpected drops from sentiment or bad news, or just to gradually and most frustratingly drift lower, slowly being sandpapered to death.

Direct investments are generally illiquid, so it’s crucial to thoroughly understand what you’re investing in and avoid going in too aggressively. Then you can sit in them without them being as volatile or as sentimentally or short term driven as listed stocks, whose price is in effect in an auction each day.

Therefore next year in 2023, we would expect we’ll do less listed-stock picking and to look for more promising seed-cap or pre-IPO deals. Working together as a club, we can hopefully get access to a lot more deals than we could just being a bunch of individuals.

Lastly, even when things seem exasperatingly frustrating, just know that markets do always turn, and ten baggers start happening again - you just need to get set in the down periods and be patient and hold to your beliefs during these difficult bear periods. Its a case of “Buy them when you hate them – sell them when you love them” and that’s hard to do.

We are currently lining up some very promising new calls for 2023, to know more or participate early, you should join our club. Can you really afford not to?

Disclaimer

Please be aware that past performance is no guarantee of future performance. No financial advice given. You are encouraged to do your own research (DYOR) on the above mentioned companies and their strategy/progress and make your own financial decisions.