Adjusting for risk
October 28, 2020 Leave a comment
During a client call yesterday, I was trying to give an example of what I thought was a ‘marginal trade’ and Fortescue Metals (FMG.AX) came to mind.
Coupled with my quick view of the iron ore supply and demand landscape, an iron ore price trading at the upper end of its historical range and a technical analysis snapshot, my opinion was that FMG either trades up or down $4, from its current price of $16.30.
Albeit a 25% return is enticing, an even money bet of perhaps losing 25% renders it a ‘marginal trade’.
To some extent, this can also be example where the investor needs to quantify or understand how much risk they are taking, compared to the return they are seeking.
Incidentally, in June 2020 I published an article (see link below) titled, “Iron Ore – As Good As It Gets”
#riskadjusted
#fmg
October 28, 2020
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 