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.

See related blog posts:

• The Missing Link Between Oil Price & O&G Profitability
• My Upstream Oil & Gas Rescue Operations
• My Downstream Oil & Gas Recovery Operations