Sunday 28 December 2014

My Oil Stock Adventures

I never realised I had so many oil-related stocks, until nearly every one of them started to tank. That is the problem with a bottom-up approach to stock investing; you might not realise how concentrated you are to a particular industry. The list of my oil-related stocks (prior to the mini-crash in Oct) is: MTQ, ChinaAvOil, PEC, Rotary and CH Offshore. During the mini-crash in Oct, I had picked up CSE Global and averaged down on MTQ, not realising that oil prices were falling steadily. It was only in late Nov when OPEC decided not to cut production did I realised that oil prices were falling so rapidly. As you would have guessed, both CSE Global and MTQ dropped below my buying price. The only consolation I had from these oil-related stocks was Falcon Energy's conditional cash offer for CH Offshore at $0.495, thus giving me a put option on the stock. Hence, despite Keppel Corp and SembCorp crashing through multiple support levels throughout Oct and Nov, I decided to steer clear of these 2 stocks that I had been monitoring for some time.

Having no luck with oil-related stocks, I decided to turn my attention to non-oil-related stocks, hoping to have more luck there. UG Healthcare was having an IPO in early Dec. I usually steer clear of IPOs, for reasons discussed in The Initial Public Offering, but with Riverstone performing so well, I decided to apply for the IPO. Unfortunately, I did not get any shares. Not only that, when the stock started trading, I went in and chased the stock and bought it at $0.295. Furthermore, due to miscommunication with my father, he bought another tranche for me at $0.26. The stock promptly fell to $0.23 by the close of the first week of trading. So, here I was in mid Dec, having lost money on oil-related stocks, broke my rules on not buying IPO stocks and had double exposure to the IPO stock! While it is quite normal to see a stock goes down further after buying it, this series of events was a complete mess! I promptly sold off half of UG Healthcare at a loss to reduce my exposure.

Having no luck with both oil- and non-oil-related stocks, I really should have taken a break from the stock market. However, Keppel Corp kept on tempting me with "everyday low prices". I decided to dig in and review the stocks and my portfolio.

The first thing I did was not to go out and buy Keppel Corp. Rather, it was to shore up the defences in case the stock market goes further south. A few stocks were identified for selling, namely, Boustead (for falling below a trailing stop), GoldenAgri (it was a fringe stock in my portfolio anyway), Midas (earnings have not recovered after 3 years) and LTC (jury is still out on this stock, though). In addition, I had 2 put options in CH Offshore and UE E&C (takeover offer at $1.25). I sold Boustead and GoldenAgri to replenish the cash.

It was not possible to go in and buy Keppel Corp without first analysing where oil prices would be heading. But since I am not an expert and my analysis is likely to be wrong, I shall spare you the details of such incorrect analysis. In essence, I bought Keppel Corp. Between SembMar and SembCorp, I actually find SembMar to be more attractive, but with its Price/Book ratio at 2.2, I decided not to break any more rules. So, I bought SembCorp instead. Finally, my oil-related stocks started to rise after I bought them.

In summary, there will be times like this when nothing seems to go right. Stocks fall after you bought them and rise after you sold them. Rules that you set are broken and past mistakes are repeated. When such times happen, take a break. After you have calmed down, take a hard look at your portfolio and the stocks that you have been monitoring. Rebalance them so that you are comfortable with your portfolio even if the stock market goes further south.

Lastly, I was at a bookstore the other day looking at the book titled "Antifragile". Attached on the cover of the book was a slip of paper that said "Tough times don't last; tough people do".

Wishing all readers a Happy, Prosperous and Healthy 2015. Thanks for staying tuned to this blog throughout the year.

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  1. Hi CW,

    So, did you buy the book Antifragile? It's a great read.

    Misfortune seldom occurs singly. It never rains but pours. I wonder how many of us live life, all prepared for 1 big hit or several small hits in sequence, until several big hits occurs simultaneously or within a very short period of each other.

    Back to the book Antifragile.. I like his definition of it. To be antifragile is to not only be robust (i.e. to survive in crisis) but also to thrive in one.

    May the new yr bring good fortune and good health to you and your family :)

  2. Hi CW,

    Oil and Gas is cyclical. The tumble come fast this time. Consolation is Warren Buffett also bought a huge stake in Exxon in Nov 2013.

    Hi LP

    Spend some time researching on Nassim Taleb lately and quite impressed by his character and some of his views.

    Was deciding on Black Swan or Antifragile book to read first.

    Any suggestion?

    Btw happy new year to all in 2015.


  3. Hi Rolf,

    If you've time, you should read this in order:

    1. Fooled by randomness
    2. The Black Swan
    3. The bed of procrustes
    4. Antifragile

    Book 3 is optional. It's about aphorism, basically short quotes like "Buy low sell high". You can skip that if you want. But for a truly mind changing NNT (Nassim Nicholas Taleb) experience, you should read in that order prescribed. It gives you a context to understand his later works better. It's meant to be read as a trilogy (with Book 3 thrown in as a side note).

    If you read it in that order, his works also progressives more and more deeper. Antifragile can be quite a cheam book, requiring a few readings to fully understand. I'd only read fooled by randomness twice, the rest just once.

    1. Hi LP,

      No, I didn't buy the book. But I borrowed the book and "The Black Swan" from the National Library. I actually found out about the book from your blog, so thanks for the recommendation and the order of reading the books above. It's very different from the rest of the investment books.

      Hi Rolf,

      Thanks for dropping by. Have seen your blog. Very insightful!

      As for the oil prices, nobody can predict them with certainty. We just have to rebalance and be comfortable with our portfolio at all times.

    2. Hi LP,

      Thanks for recommendation. I am currently reading street smart by Jim Rogers. Once I finish, I will borrow Fool by Randomness.

      Both Nassim and Jim are non-pretentious which I admire v much.

      Hi CW,

      Thanks for visiting my blog before. Your blog is definitely not boring! Boring investor with exciting blog posts.... :)

      Happy new year to all...

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  5. Hi Chin Wai, nice piece (My Oil Stock Adventures). May we republish it on ?
    Thanks in advance.

    1. Hi CT,

      It's my pleasure. Have benefitted from the posts at NextInsight previously.