Portfolio Review -2008-2009ish

It’s been a while since I posted and I’ve been meaning to write a portfolio review for some time.  In fact, I considered writing this in January but I thought better of it as I knew I was well over 50% down and didn’t want to face up to my losses.

Over the last 2 years my approach has varied, I now feel however that I’ve settled on something that I am more than happy with.  In the early days I had decided upon a HYP, but after seeing huge falls in the small cap sector I ventured over into that.  After some mistakes, I then decided on a change of tac, and decided to concentrate on commodities as they will hold value and come out of this mess with their fundamentals unchanged.

I don’t intend to document every share that I have invested in, but rather concentrate on the main winners and losers.

The Losers

Accident Exchange - ACE
Exceptionally Low PE, and belief that I the company was on the mend, led me to invest more into this company than was wise.  I documented my initial investment logic here, talk of improving cash collection never materialised and after doubling up (cos it was a no brainer!) the price fell dramatically any I decided to call it quits and left with a large loss (>70%)

Indigo Vision - IND
I estimate that I lost around 60% on this share before cashing in.  I still like this company, but saw better opportunities to make my money back elsewhere (see the winners). Popular stock, but with a high PE which isn’t really where you want to be in Big Bear Market.

Touchstone - TSE
Another disaster of an investment.  This time the amount involved was less and I got out at a 60% loss which turned out to be a good decision as it kept falling (another 50% ) and have recently announced that they are looking to de-list.

Encore - EO.
Very disappointed with this share, my inital post about it can be read here.  I took a hugely overweight position at 40p+ (my fault), expecting a sure fire gas storage sale (90% chance of success) which didn’t materialise.  I held and watched them drop to around 7p but decided to hold in anticipation of the sale of their main discovery to date: Breagh.  However, just last week the sale was confirmed and the price was at the very low end of what I had expected. The Breagh sale valuation has caused me to doubt the managements ability to deliver. In my oppinion they have sold a valuable asset on the cheap although admittedly you could argue that they have been a victim of circumstance (credit crunch).  After averaging down, I’ve left with a 50% loss.

And the Winner Is…

After listening to the like of Jim Rodgers, Peter Schiff etc I decided that commodities was the best place to be.  I already had most of my money invested in  Aminex and Soco but decided this was the time to go all in:

Nautical Petroleum - NPE
I had already been investing here and was well under water on them.  However, at the time I sold my losers above NPEwere trading well under cash and so I invested all the losers money in them as I saw their downside limited,  A good decision, they have subsequently gained around 150% and made a large percentage of my losses back.  Recently I have began to sell some of this hugley overweight position to diversify into other holdings and re-balance my portfolio.

Other Core Holdings
I have still held onto my large Soco (SIA) and Aminex(AEX) holdings.  I am 75% down on Aminex but still see huge upside there so have decided to stick with them in anticipation of farm out news / Ruvuma drilling.  Soco have been a godsend (my valuation here), sure I’ve lost money in them  but far less than I would have elsewhere so my overweight position has payed off.

My current holdings are as follows:

41% Soco - Big, safe and huge Vietnam upside.
18% Nautical - Vast reserves and plenty of cash.  Not enough cash to fund development though - hopefully get takeover soon.
13% Med Oil - Similar to NPE with reserves that are orders of magnitude above the price - hopefully takeover
8%  Aminex - waiting for KN1 seismic, Ruvuma and Shoats Creek farm out news.  I have hight hopes for this following the recent placement.
7%  Aurelian - Huge gas discovery in Poland but partner pulled out, recent placing safeguards immediate future and attractive asset should attract new partner
6%  Sunkar - Vast Phospherous deposit in Khazacstan but again - how will the finance it.  Floated at 120p and current trading around cash (12p).  Not sure about the management so probably won’t increase stake further.
3%  Petro Latina - Lots of nice drilling prospects in south America, recent results should have rerated the price above its current 42p level.
<1% Frontera - Quick trade gone wrong.  Bastards.
3%  Encore - Looking to get out but as it’s trading around cash I consider it a safe place to be at the moment.

Overall Performance and Lessons Learned

It’s been a roller coaster ride, a bit more exciting than I’d really like.  I’m currently down around 35%, but have huge upside potential and hopefully now a more balanced portfolio.

I have been luckiny in that following my large losses, NPE was there for me to take advantage of its depressed price and make some of the money back. I’m currently running a reasonably concentrated portfolio, but am happy with the company management, geographic location etc though I will probably look to rebalance NPE down towards 15%.

My biggest mistake was taking overly large positions in small volatile companies expecting positive results but with no real asset backing to protect the downside.  Although I still have overweight positions, I believe that the companies in question have assets/cash which more than cover their price and am comfortable with my holdings.

I think over the course of the next year my portfolio will remain reasonably static, though I am looking to introduce another holding in the near future (I’ll keep it a secret for now, you’ll need to look back and check later:O)

My prefered method of LTBH with little or no trading took a bit of a blow intially as some of my quick trades (EO., ACE) went wrong and I was forced to stick with them - Now I’m back on track and hopfully  can look forward to a good year.

With governments printing money and oil a good stafe store of value, I think I should do well going forward.