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Oilman Jim's Private Blog


Oilman Jim - PTAL PET SOU and making money in the markets

PetroTal (PTAL) announced third quarter results and an operations update.  The good news is that current field production reached a new record with the last 30-days averaging over 8,500 barrels of oil per day, with all five oil wells online.  The bad news is that the cash and cash equivalents amount of approximately $40 million stated in the company's RNS dated 21 October was incorrect. The company's actual cash and cash equivalents position as at 30 September was $20.5 million.  The CEO, who would have reviewed and signed off the document, surely would have known the company's cash balance, so he's either sloppy or deliberately let the mistake slip through.  Either scenario unfortunately places a question mark over the accuracy of the company's reporting and creates doubt.  I highlighted this at 16p, so there's around a 50% profit to take.

Petrel Resources (PET) reminded shareholders of the upcoming Extraordinary General Meeting which takes place tomorrow in Dublin to approve the issue of new shares to private equity investors and friends and business acquaintances of the new control parties. It is then anticipated that a flow of potential investment proposals will be offered to the company.  I suggested Petrel numerous times around 1p earlier this year and it closed at 7p yesterday, up 600%.   There are more shares with this sort of potential in the private blog.

Sound Energy (SOU) announced approval of the Environmental Impact Assessment for a 2D seismic acquisition programme within their permits.  The directors' hearts simply aren't in this.  None of their names are stated anymore in the RNS and the only contact for the company is  I've been calling this down since last year when the share price was over 10 times higher, but it still has a market cap of nearly £40 million and plenty of room to fall further.

Some of these companies have been making me think further, particularly about their adverse impact on investors.  Looking at social media these days, it appears a lot of people are losing a lot of money and I think it might be helpful to examine why, and ask whether that actually has to be the case. 

Going back in time, prior to the arrival of the Internet, it cost over £10,000 a year to have access to all the information which everyone has available now online for free and, unfortunately, it does not appear this advance has helped most private investors.

Their information sources then broadly were daily and Sunday newspapers, weekly magazines such as the Investors Chronicle, and tip sheets which were sent out by post on a weekly, fortnightly or monthly basis.  Virtually all this material was professionally written by financial journalists and, although it was the only information source available to most private investors, at least in the main it was factual.

While these traditional information sources still exist, most investors now either access the source data direct or receive an account of it from others.  In doing so, they run the risk of either misinterpreting the information themselves or having the information misinterpreted to them.  And that's the charitable case where no one's actively misrepresenting it, which is often the situation these days.

While some private investors have developed their own mastery of the market, with the majority it appears to be the blind leading the blind, with the occasional shepherd leading his sheep to slaughter.  There is no doubt from their own comments that many are losing money - and some are losing a lot. What should be the benefit of full and equal access to information ironically has turned out to be a disadvantage for many.

Another route to grief is the idea that has sprouted up that anyone can earn their living just trading the market.  Of course a few can, but they are the exception; the rest of the would be professional traders fail primarily due to ignorance, laziness, greed, lack of market awareness, gullibility and fear of missing out, effectively a desire to be in everything.

There are a number of serious investors, who have a steady approach and overall reap rewards.  Unfortunately, the majority, having their attention drawn towards hundreds of generally poor quality companies every day, simply can not see the wood for the trees.  A further problem is that accurate comments on social media get buried under the pile of nonsense being posted.  Many are all over the place, some buying a different share every day and each time crystallising additional losses due both to their lack of patience and their lack of conviction.  Some that do hold, think their shares are like football teams and support them tribally.  Buying the shares that are being most actively promoted, they constantly get hurt by placings, which have been forward sold with guaranteed profit for insiders and virtually guaranteed losses for them.

One of the most important lessons is that it is not just about the shares you buy, even more importantly it's about the shares you don't buy.  You need to control yourself and go only for the certainties, the small number of winners each year that are virtually guaranteed.  If you see value or advantage in receiving a large number of tips then you probably can't be helped.

My approach is take one sector of the stock market and master it, an area which you have experience of from your working life or have a genuine interest in is best.  Have absolute conviction in what you buy and hold, and if you don't have absolute conviction, don't buy it.  Understand why you're buying it now and when you're going to sell it - and, critically, where that company is in its operational, financing and promotional cycle.  If you're looking for a short-term trade, then the company needs to be heading for an event.  Most importantly, only buy when you're absolutely certain and don't let it bother you if you miss a few.  Always realise gains and de-risk.  And position size so that even if it goes to zero it doesn't hurt you.  That is the way to profits. Let me know if you're interested in reading or hearing more about this subject and I'll write and record Part 2.

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