This is a painful portfolio update for me, two of my holdings are down considerably and I’m sitting on losses not because of an error in judgement (I will happily admit I made errors but I had realized that) but because of greed. I risked a lot of money to make a further 1% on a trade. That greed for a fraction has cost me over 40% on each position. Lucky for me (or possibly due to intelligent position sizing), these positions were not large and haven’t cost my portfolio much. My pride has taken the brunt of the hit as opposed to my wallet. Hopefully by telling the tale of my woes readers will avoid similar pitfalls themselves.
Stocks have been moving down recently, and none more so than Oil & Gas companies. Lots of names in the industry are trading at just half their 52 week highs. The reason often given in the news is forecast lower global demand for oil which is being interpreted as bearish for stocks in general. However it has, in mine and others opinion, more to do with the big increase in supply and production from North America predicted in the future. The USA is on track to become the largest producer of oil in the world.
Legacy Oil is a low cost North American producer that can remain profitable at low oil prices and has large upside if oil prices are high in the future.
Last week Warren Buffett was frank on CNBC and admitted that he made a mistake investing in Tesco ($TSCO.L). It’s hard to argue with him, shares in Tesco have gone only one way since he first invested in them in 2007.
I myself am among the unlucky Tesco shareholders, however was fortunate in early 2013 to realize my folly and sell almost all my shares (and even make a small profit). Though Tesco made many obvious mistakes such as its failed entry into the US market, it is actually its home market, the UK, which has contributed to its disastrous share price performance. I think the tale of Tesco highlights some important areas of danger that investors often fall foul of, particularly relying on financial metrics while giving too little thought to qualitative factors of a company and how it does business.
The readership of this blog is quite varied both in geographical terms, but also I think in investment experience. Many people that manage their own money don’t actually have any formal qualifications in finance. So I’m sure many readers will respond the same way I did some time ago when I asked a friend what was he doing his Masters dissertation on and he replied ‘Dark pools’ – by pulling a confused grimace. I think it’s worth introducing these dark pools to those of you that know little or nothing about them.