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Week 41: A bit of a shellacking

Portfolio Performance

Portfolio Composition

Trades

Update

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:

  1. $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.
  2. $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.
  3. $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.

Margin

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.

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