I have one junior up nearly 40% since last Thursday. Unfortunately versus my ACB is only up 2%. 
There was a lot of pain and I missed the timing. But at least I won’t pay dearly for it.
Be careful. Averaging down is by far the most common way people get wiped out. It might work the next time and the time after that and the time after the time after that, but sometime in your lifetime you will be as confident with another investment as you were with the juniors and averaging down will cause a bigger loss than what you ever made back using that technique. The fact that it worked out this time will make you less fearful to try it out again. I’ve seen some great minds fall to that temptation. I would even say geniuses.
^ I only average down if my investment thesis remains intact. This particular firm is a cost leader and has excellent execution. Its likely to survive any shakeout so unless you think oil is done forever, its probably a decent buy. I agree the strategy can be dangerous though if done blindly. Need to be careful to test all your assumptions. I was also hedging as I went so my total exposure wasn’t that substantial.
^^
Happy that it’s working out for you Geo. You were pretty uneasy about the whole thing.
Thanks to financial steroids in Europe I am making money on Total.
P.s. have to echo FT on your averaging down thing. I’m sure you know what you’re doing, but just be careful.
Small cap holdings off about 7% this morning, hedges up though so overall I’m down about 2%. Apparently the rally ran out of steam.
This Norwegian industry vet (Rune Likvern) has had his own blog for a while. He normally writes good material but a few months ago he posted a cool graph on unconventional production trends by monthly vintage in North Dakota. It’s pretty cool, and may provide an indication of how aggregate Bakken production looks in another year or two if prices don’t recover.
geo’s style with dollar averaging makes sense especially when combined with strong companies. it allows you to feel out a new position. if it goes up, then no worries. if it goes nowhere, you can add to it. if it goes down, you can add more to it. the best time to buy is when stuff is dipping so it makese sense that stuff continues to fall after your initial buy.
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I disagree.
Disciplined cost-averaging in a diversified equity portfolio is probably the soundest investment technique that exist.
However, building a losing position concentrates your portfolio.
Again, to each his own and I am no authority on portfolio management but you can get burned like that.
It doesn’t concentrate your portfolio at all, I disagree with that. But I do agree that it can be a risky strategy. If the stock is down because of news that adjusts value, that’s a problem. If you revisit your model and value is still available its not an issue. The counterpoint would be “why should I not invest in an equity with superior growth prospects just because I have an existing position.” Every purchase needs to have an expected return and should be evaluated independently.
i think i get what you are saying but let me clarify.
a losing position reduces your concentration. adding to the position can offset what you lost or add additional concentration. really depends on the amounts you put to determine if you are increasing concentration.
buying on the downside at face value is a risky move since people think “it must be going down for a reason.” but you are getting something at a cheaper price so it in fact makes it more attractive.
Now buying strong companies when prices fall is juss plain smart. since these are companies that can weather a downturn the longest. the weaker counterparts will have an increased probability of dying which will lead to less competition in the future. Assuming it is a short term problem, to the victor goes the spoils. Now if you mis characterize a long term problem as short term then yes you ****ed up
See Bayes’ Theorem.
Most people aren’t as objective analyzing an investment when they’re already in the investment than when they’re on the sidelines possibly looking to get in. It’s more difficult to look at something rationally when you’re already down a lot, because emotions play a bigger role.
I find keeping my positions not a signfiicant portion of the total helps keep me fairly level headed
GMO’s quarterly letter has Grantham discussing how he missed the trends in oil. And he discusses his analysis of what is going on, the outlook, and how inefficient commodity markets are ha ha
The other article in the letter discusses how they are reducing USA exposure and buying other countries. They do some historical analysis to show even buying the worst performing cheaply valued country outperforms being in the highly valued country. And the reason why GDP growth isn’t useful in forecasting stock returns in the long run.
I’ve been on vacation on the opposite side of the world for the past week so I’ve missed out on the yo yo ing oil prices. Noticed in my portfolio I’m up like 15% or something on XOP since I bought it. From what I see I don’t buy the rally yet. Macro factors are weak, storage is high. And my works analysis still sees production growing this year, just not as much as we did 6 months ago. I also heard that gas prices spiked at home in Houston thanks to some union that works the refineries decided to go on strike.
I got a long an on-shore services provider a few days ago. IMO, these guys will just move their asset operations international where they could have similar growth/margins in Saudia Arabia or somewhere else in the Middle East.
I think the world will be supplied for a while now, but not over-supplied where crude is at $35/barrel. I still think the data shows that the average cost to produce for on-shore drillers is around $50/barrel and they need 20% mark up on that to just stay in business. The deepwater guys are probably like $60/barrel so overall I peg oils range around $40-$75/barrel. I don’t know enough about the industry but I do know the sell-side hates on-shore US service providers and they seem like they have the best story to grow international.
People will always need oil, prices are still low, and it seems like a classic boom/bust scenario where prices will recover. Just my opinion.
But the key is finding companies that will survive the bust and boom even better than before in a recovery. That’s the fun part. This is the time where oil men make and lose future fortunes
yall need to listen to me and read The Big Rich
http://www.amazon.com/The-Big-Rich-Greatest-Fortunes/dp/0143116827
As Bob Seger wisely said, the trick is never play the game too long.
I’m seriously considering a position in TOT. Do you own the ADR? Or do you have access to the actual stock in EUR as you’re over there? Trying to get my head around the withholding tax issue. 30%, maybe reduced to 15% if I file some form (which may or may not work with the ADR). I can’t buy European listed stocks directly with my broker (CAD or USD only). I suppose to avoid the dividend tax to some extent, I could sell on the ex day and buy again the following…