I've been following Labrador Iron Mines Holdings Ltd. (LIM-T) for the past few weeks. It is an interesting story with lots of potential. It also appeared rather risky. I'm never all that keen to invest in a company referred to as "an unprofitable company . . ."
Some believe LIM will outperform others in its sector and have placed a 12-month target price of $4.50 on the stock. But this is not a forecast without risk. In fact, ScotiaMcLeod rates the risks associated with this stock as "Caution Warranted".
Caution Warranted: Exceptionally high financial and/or operational risk, exceptionally low predictability of financial results, exceptionally high stock volatility. For risk tolerant investors only.
Today the market is up. LIM is down. Just days ago LIM was above $2. Today LIM is bouncing around the $1.40 mark.
So, why would I buy some LIM. I like resources. I like iron ore. Sadly, it is a resource that may not come roaring back soon. The Chinese economy is slowing. Europe is in recession. The American economy is cruising just above stall speed.
I may like resources but I'm in no hurry to buy LIM. Yet, the price looks inviting. At $1.40 a share, it does not take much to buy a thousand shares and this price may well drop some more before it climbs. This is a stock that can be picked up with spare change. Even if LIM doesn't reach its target price in the coming months, it may well climb enough to deliver a nice return. And, if I must hold on to LIM for a couple of years, so be it. The return may well be worth the wait.
And if it wilts, my investment will be small and the loss will be of little consequence.