The Penny Stock That Warren Buffett Used To Root For
Earlier this year, I had an article idea that gradually dissolved. A small company on the (TSXV:V.XOP) named Canadian Overseas Petroleum had a very interesting triangle that few penny stocks ever achieve.
First and it yet remains, it has one of the bluest of the blue chips as a strategic partner to drill two regular and one straddle well in offshore Liberia. Exxon (NYSE:XOM)which owns 83% of the potential field, leaving a 17% for Canadian Overseas Petroleum. How Harvey F. Firestone, W.E. Dubois or Marcus Garvey would have loved to have seen Exxon in Liberia.
Earlier in 2013, I received a literary gift of sorts when Warren Buffett had a sizable position in Exxon. This provided a substantial endorsement for Exxon's near term prospects. However, just before going to either Seeking Alpha article or blog, I was alerted that Mr. Buffett was selling his position in Exxon. Although this did not circumvent the strategic partner Exxon, it did cause my earlier title (The Penny Stock That Warren Buffett Is Rooting For) to require change.
Thankfully, I did nothing but further incubation. Then the Ebola virus broke and I wrote an article on an adjacent medical company and I came to realize that many of the worlds health authorities have come to believe that Ebola will plague West Africa for another 18 to 36 months. When I realized this I sold my shares in (V.XOP). However, I now realize that it is very possible that as Exxon waits the Ebola situation out for perhaps 2 years, and that boredom and tax loss selling could create a tremendous opportunity in the shares of Canadian Overseas Petroleum say in 12 to 18 months.
An associate tells me of numerous persons, plus ancient books that they have read which provide significant insight into the Natural Resource potential of Liberia. Perhaps at a later time I will delve into this fascinating history, however for the moment I am simply sharing Canadian Overseas Petroleum as stock to watch near term go down more than up. However, when you hear the Ebola plague in is in check and capitalism is ready to roar on the West Coast of Africa, you might want to have studied this one enough to grab a flyer position. One analyst projected a price for XOP during the era of Buffett's involvement with Exxon of approximately $1.50 cents per share, this was approximately a 600% gain from the share price at his time of writing. His scenario assumed Exxon's drilling and completion success.
XOP Should Go Down Further
As of now I have no position and will probably wait at least a year to reenter. However, I expect Canadian Overseas Petroleum to sink to 10 cents a share during this tax loss selling this season alone. On paper XOP management appears strong, capable and experienced.
Will This Simba Become A Lion King?
Another African Oil stock that has a website that can provide you with a wealth of data on Liberia is Simba Energy (TSXV:V.SMB). I think the Simba Kenyan situation bears watching it could move up sharply when the Ebola scare leaves the region. Perhaps Simba will be a Lion King stock! It too involved total risk of principal. My associate familiar with Liberia, was able to believe everything stated about the tremendous onshore potential in Liberia that Simba has. However, Liberia has little viable infrastructure. Simba is a Kenya/Chad/Ghana play.
Canadian Overseas Petroleum is a stock that should be brought at prices that cheaper than today's and even at that you could loose all of your principal investment. I do however see the possibility of many, many multiples over an 18 to 36 months horizon. No need to hurry, just watch.