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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Grande Portage Resources Ltd. (CVE:GPG) share price is up 94% in the last three years, clearly besting than the market return of around 12% (not including dividends).
Grande Portage Resources didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Grande Portage Resources will find or develop a valuable new mine before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is almost always a chance they will need to raise more capital, and their progress - and share price - will dictate how dilutive that is to current holders. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Grande Portage Resources has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
Grande Portage Resources had liabilities exceeding cash by CA$323,781 when it last reported in January 2019, according to our data. That puts it in the highest risk category, according to our analysis. So the fact that the stock is up 25% per year, over 3 years shows that high risks can lead to high rewards, sometimes. It's clear more than a few people believe in the potential. You can click on the image below to see (in greater detail) how Grande Portage Resources's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. One thing you can do is check if company insiders are buying shares. It's usually a positive if they have, as it may indicate they see value in the stock. You can click here to see if there are insiders buying.
A Different Perspective
Investors in Grande Portage Resources had a tough year, with a total loss of 35%, against a market gain of about 1.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5.0% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you would like to research Grande Portage Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.