Sizing Up My Trading Record In 2011

by: Oil and Gas Investments Bulletin

My portfolio, which I use as the OGIB subscriber portfolio, finished 2011 up 48.2% on closed trades (stocks that I actually sold in 2011) and up 36% on open trades that were initiated, or first bought, in 2011. If I include stocks I bought in 2009 and 2010, my gain on all open positions is 36.7%.

In all, gross gains in the portfolio totaled $449,744 while gross losses came to $52,860.

Strangely, the year didn't seem that profitable, emotionally or mentally. There was A LOT of volatility and angst - June and October were particularly harsh months for the junior resource sector. And I was guilty at times of getting too wrapped up in the market swoons, trading out and trading in again.

HOWEVER, I did find what I think are my best trades of the year in the last two market bottoms in June and October so I was able to use market panic to my advantage some of the time.

Each January I try to look objectively at my trading and track record and try to determine what I did right and wrong; what can I do better to bring more prosperity to me and my subscribers.

Here's my list for 2011. First, here is what made me money. In my next article, I will share what lost me money in 2011, and I'll include my outlook for 2012:

1. When I found a winner, I kept buying; averaging up. In my four biggest winners of 2011, I continued to buy the dips as they rose—even after they doubled, I kept buying. I first bought Coastal Energy (CEN-TSX, OTCPK:CENJF) at $2.50; I bought more in the June swoon at $8.80. Today, all those stocks are above the highest price I paid for them. Now, when I do that, I listen to both the company and the stock because sometimes they say different things. My job is to do the research to see which one is more accurate.

2. I did not average down on my losers, except one. But my losing trades were obviously a lot smaller than the winners. That's because I don't allow myself to believe that I'm smarter than the market. If the market is selling a stock down, I always believe I have made the mistake and I start making calls to figure out what I don't know. I don't say "the market must be mad" and start buying with both fists at lower prices - setting myself up for a BIG loss. (My one average down stock is now back up to near-year highs.)

3. I sold some of the more speculative stocks into anticipation of good results—I didn't wait for the results. I sold TAG Oil Ltd. (TSE:TAO, OTCQX:TAOIF) a couple times just below $7 as the stock went sideways for a year. I sold most of my Sterling Resources (SLG-TSXv; OTCPK:SGURF) before the news on its Cladhan oil well in the North Sea came out. In 2010, Xcite Energy (XEL-TSXv, OTC:XCTGF) made me huge gains that way.

4. When the market turned negative in the early spring, I was vocal about selling my juniors and moving upmarket, to higher priced, more mature and less risky stocks. This made me more open to buying additional shares of my higher priced winners -- even after they were already up. (I could also argue that I didn't sell enough of the penny juniors fast enough and that DID COST ME a lot of money.)

5. This lesson did cost me money, but it saved me a lot more — Be flexible; be willing to say you made a mistake. Normally when you make a mistake it means taking your initial loss and moving on; I was able to exit Valeura Energy Inc. (VLE-TSXv, OTC:PNWRF) and being able to exit the position with only a 6% loss - it's now down 70%.

But being able to change your mind also means having no ego on a stock that turns around which you previously sold. I sold two stocks this year that had horrible charts in a bad market and days later they each had something happen that fundamentally changed the company for the better. I jumped back into both - well above the prices I just sold them at for the same reason I originally bought the stock, and they are both 40% higher now, within weeks.

I'm very happy with a 48.2% gain in 2011. But it could have been a lot better if I had practiced a couple simple trading rules. Sadly, even after 25 years of investing, I find myself making some of the same mistakes I made as a rookie. I'll tell you about them, and why I have a bullish outlook for junior oil and gas stocks (OK, just oil) next.