Jim Kingsdale: EIS Portfolio Report

 

Number of Stocks:	37 long, 6 short
Concentration:	Top 5 holdings = 42% of total
Percent Long:	94.5%
Percent Short:	3.0%
Top 5 Holdings, in order:	Canadian Oil Sands Trust - COSWF (oil sands) Transocean Inc. - RIG (drilling and services) TBS International. - TBSI (shipping) Sociedad Quimica & Minera de Chile - SQM (chemicals incl. lithium) PetroBank (PBEGF) - oil and oil sands

Note: percentages above taken on stock portion of portfolio only

PERFORMANCE

	EIS	OIH	IYE	SPY (without DIVS
2008 YTD	26.6%	11.8%	8.1%	-4.0%
May 2008	16.6%	7.6	3.7	1.5
April 2008	11.3%	11.0%	10.9%	7.2%
March 2008	-6.9%	0.2%	-2.3%	-2.0%
February 2008	10.4%	12%	8.5%	-2.6%
January 2008	-4.4%	-16.7%	-11.2%	-6.04%
2007	38.7%	35.3%	39.7%	3.1%
2006	28.9%	8.55%	1.05%	13.62%
2005	34.4%	51.4%	52.43%	3.0%
2004	38.2%	37.21%	26.74%	8.99%

EIS = Energy Investment Strategies account
OIH = Oil services ETF
IYE = Broad oil and gas ETF
SPY = S&P 500 without dividends reinvested

Click here to see complete historical information regarding performance.

LOOKING FORWARD

SUMMARY

The EIS portfolio’s performance is correlated to the price of oil and the direction of the stock market.

If, during the next year or so, the dollar strengthens and new oil supplies come on line as oil demand growth begins to pull back, all of which seem likely, then oil will likely encounter a sustained pullback perhaps testing $100. That would help stocks in general but oily stocks would under-perform.

Natural gas has been outperforming oil recently and is likely to continue.

For these reasons, the EIS portfolio is now weighted toward transportation stocks (shipping and rail) that help balance the global need vs. global supply of food and fuel commodities, particularly grains and coal. It is less oily and more gassy. Some changes in these directions were made after 5/31/08.

CRUDE OIL

Discussed above.

NATURAL GAS

The btu ratio of gas to oil is 1-to-6 while the price ratio is now over 1-to-10. It is likely that the price ratio will move more in line with the btu value relationship. Gas is obviously preferable to oil on a greenhouse-gas emitting basis so could reasonably sell at a premium to its btu value.

The strongest driver of North American natural gas prices is the fact that much higher prices in Europe and Asia are limiting LNG supplies to North America. While new unconventional gas fields in the U.S. and Canada are being exploited with new drilling techniques, there are some pipeline limitations and such fields also experience very rapid depletion rates.

The supply/demand dynamics of the oil market and the gas market are quite different and substitution potential of one for the other is limited. Nonetheless on a global basis, and to a lesser extent in N. America, natural gas is starting to be substituted for gasoline as automotive fuel. Fleet substitutions for buses and some trucks are more feasible in N. America.