Why it pays to wait . . .
Buy when there is blood on the floor of the exchange
In March of 2020, COVID-19 hit North American energy markets like a sledge hammer and professional money managers ran for cover. Not me. I ran into the fray.
Here is a list of some purchases I made during the 2020 chaos:
These modest purchases were additions to my existing energy portfolio which was suffering along with everyone else, and for the total 2020 year my energy portfolio remained under water, but not by much.
Throughout 2021, I added to my holdings, ending the year with a 188% return and a tidy gain.
The point is not to crow about this small portfolio’s stellar performance (it is not my only account) but to encourage energy investors to remain calm during rough weather, and exercise patience. When markets panic, bargains are everywhere. The prices for Surge, Baytex, Athabasca and Obsidian were bizarrely cheap in the early days of COVID with Mr. Market betting these companies would fail. Today, all are approaching a debt free state, are not at risk of failure, and remain on my “BUY” list (although I have sold my holding in Obsidian in its entirety and bought another Cardium player - Bonterra (BNE.TO) which I prefer and in which I now hold 15,000 shares purchased in June)
My final comment is to recognize that it is dangerous to try and catch a falling knife and worthwhile to exercise patience if markets collapse. I expect a recession over the coming months and unlike many economists I think it will be deep enough to trigger “forced selling” by many funds and create many bargains. Unlike 2020, most of the energy names that interest me now have strong balance sheets and little risk of failure, so I don’t expect the likely sell-off to be as severe as in March of 2020, but I do think it will be worth waiting for.
As of May 31, 2022, my largest holdings in this account (I have added no money, just taken out the occasional withdrawal) comprised:
50,000 Birchcliff (BIR.TO)
60,000 Spartan Delta (SDE.TO)
30,000 Cardinal (CJ.TO)
10,000 Headwater (HWX.TO)
20,000 Rubellite (RBY.TO)
5,000 Surge (SGY.TO)
2,000 Tourmaline (TOU.TO)
5,000 Whitecap (WCP.TO)
5,000 Peyto (PEY.TO)
I expect these holdings to have a market value of $3 to $3.5 million within 3 years and to pay dividends annually of over $100,000 as the trend to shareholder returns gains momentum. Of course, I have been wrong before.
I bought Mar 16/2020 . But I bought CVE, CNQ, ERF, CPG. Your buys were too risky for me. Well done and Congrats.
Thanks Michael. As a young guy, I look for advice from people who've been through it, with proven performance.