by Marin Katusa, Casey Research:
Stories of doubles, five-baggers, or even tenfold returns abound in the resource sector. These successes are exactly why we play the game: The discovery and development of a new oilfield or gas basin can create immense value, and being part of a story like that is extremely satisfying, not to mention financially rewarding.
However, the potential for big resource returns can all too easily make investors forget just how risky the sector really is. Investors are not the only ones who get caught up in the hype – an exciting discovery can turn normally conservative CEOs and geologists into starry-eyed daydreamers waxing poetic about grand possibilities and great riches. As a story out of Brazil recently reminded us, even the world’s most successful investors can get carried away by dreams of resource riches.