Week 41: A bit of a shellacking
My practice portfolio has been taking a bit of a shellacking over the past number of weeks. I am down about 10% since the end of February when my portfolio (along with the rest of the market) peaked.
Why I’m doing poorly
When I looked at what has caused the downturn in the practice portfolio I found I could blame most of the loss on 3 things:
- $1600 loss from Aurizon Mines. I never thought Aurizon would stay below $5 for as long as it has with gold prices still over $1600. Its bizarre but the same can be said for most gold stocks right now.
- $2500 loss from Coastal Energy. Coastal peaked at around $21 per share and I sold Coastal for an average price of around $15.50. After having sold half at $17 I made a $1,000 mistake when I bought it back at $16 only to sell at $14.50.
- $4900 loss from Atna Resources. I’m not sure what to say about this one. It was not fairly valued at $1.50 so I was not willing to sell. Now I have to sit through this correction to see if my thesis plays out as I expect
My emphasis on the mortgage servicers and the regional banks has thus far proven correct, and these companies are up slightly in the last month and a half. Unfortunately their gains have been dwarfed by the above losses.
Keegan Resources: Trading almost at cash
Looking ahead I don’t plan to sell any of the gold stocks I own at what I would call ridiculously cheap prices. In fact I did the opposite on Friday; I bought a position in a new gold stock, Keegan Resources. I got Keegan off of a article on Mineweb that listed a number of gold explorers trading at market capitalizations that had fallen to levels where they were mostly covered by the company’s cash balance. Keegan has a cash balance that makes up about 87% of its market cap. I am of the mind that such a large cash position takes a good deal of the risk out of the stock. I will write up Keegan shortly.
Less of what isn’t working with Equal
I did sell some Equal Energy this week. I sold because A. the stock continues to go down even after the announcement of a Mississippian joint venture, which proves that like it or not I have been wrong in my thesis, and B. I am becoming nervous about the falling price of NGL’s and Equal, while being equally weighted between liquids and natural gas, is heavily weighted to NGLs in its liquids.
Back into Arcan
I bought back into Arcan Resources this week. The stock has come well off of its highs, down from $6 to $4.50. At this price, and given the company’s recent production estimate of 6,000 boe/d, it is trading at a reasonable $80K per flowing barrel. The company also announced a boomer well on their southern Virginia Hill lands:
Arcan drilled and completed the Virginia Hills 13-32-64-13W5 (“13-32”) Beaverhill Lake horizontal well, with excellent results. The 13-32 well was drilled to a total depth of 4505 meters and flowed at a rate of 1773 barrels of oil equivalent per day (“BOE/D”) averaged over the first seven days and 1226 BOE/D averaged over its initial 21-day production period, with maximum day rates of 1900 BOE/D (92 percent light oil), flowing dry oil up 4.5″ casing.
I also wanted to note that a discrepancy has occurred between my practice account and the actual account that I try to track with it. I’m on a lot more margin in the practice account. I’m not positive when this happened, but I don’t look that closely at the practice account balances and I so it wasn’t until this week when the margin in my practice account hit double digits that I noticed that things were out of whack. If my practice account were to reflect the same percentage as my actual account the margin would be around $2,500. I think that what happened is that I am not strict about making sure the ratio of shares that I add in the practice account matches that of the actual account and I tend to round up, so over time I have been taking on more shares of each stock than I should. Anyways I’m not sure what I am going to do about this because if I were to reduce each of the stocks that I have overweighted I would have to take a commission hit of $10 per trade because that is the standard commission charged in the practice account. I think I will just try to slowly reduce the discrepancy over time until I get the account back into alignment with reality.