What my oil stocks have told me in this oil market is – be confident to buy more on the breakouts. I’m always thinking “sell half on a double” – because then subscribers are happy - but more often than not, if a company is meeting production targets and is expanding their land packages, I should buy more.
The market is handsomely rewarding good teams with good properties and good execution.
Petrominerales (PMG-TSX) is now trading at $34 and is officially a triple for the Oil and Gas Investments Bulletin portfolio in just six months. And yet, it’s still one of my best (or worst…) lessons in oil investing in the last year.
I bought it at $11.25 in September, but sold half just six weeks into the trade for a 60% profit. Now, I had my reasons – big well declines, lack of success on their heavy oil play – but the chart was still positive and they were still hitting big wells on their main Corcel field in Colombia.
Same thing happened on Bankers Petroleum. I bought the stock at $1.77 and had a double in a month, and dutifully sold half to ride for free. After a quadruple in 7 months, I have no more stock. And it’s still higher than my last sale price.
Heavy oil producer Rock Energy; Cardium producer Midway Energy – double my money and sell half. And I don’t even want to talk about the money I left on the table with Petro Rubiales and Petrobank.
The point here is that had I BOUGHT MORE on the breakouts, instead of taking profits and riding for free, my profits would be higher – a lot higher. In this oil market, increasingly underpinned by fast-rising Asian demand, there are 5-10 baggers in the junior and intermediate oil sector, on plays both here in North America and international.
(NOTE – in the couple time when I have been lucky enough to get a double on my gas weighted stocks, I DEFINITELY sell half)
That’s why I bought more Second Wave Petroleum (SCS-TSXv) yesterday at $2.59. I originally bought this “oily” junior at $1.20 in November, and instead of selling half four months later – now – at a double, the information the company is putting out leads me to believe stellar growth in production and cash flow should continue. So I buy more.
New seismic is due out that could identify more than 100 new horizontal drill locations. And I discovered they have 70,000 acres of a completely new zone – the same Beaverhill Lake zone that Arcan Resources is getting some eye-popping IP rates of 600 barrels of oil per day. Nobody knows exactly how prospective Beaverhill Lake may be on the Second Wave ground, but it does potentially give them a remarkable 5 year growth engine – they would not need to do any more land deals (i.e. dilute the stock) to graduate to a mid-tier producer in a few years.
Sometimes investors get tempted to sell a stock as it meets analyst target prices. But analysts generally tip-toe their targets up on oil stocks, looking for mini-milestones at the expense of the big picture; putting out a big sign saying “I think this $2 stock can be $10-15 in the next year” – even if the upside is obvious – does not generate credibility for them.
Lesson learned. Evaluate at a double – take profits or make (more) profits.
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