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Strategies & Market Trends : Value Investing

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To: Mr.Gogo who wrote (39988)	11/10/2010 12:36:53 PM
From: E_K_S	1 Recommendation Read Replies (2) of 78666

Hi Dr. Gogo - Re: GMX Resources Inc. (GMXR) Don't be afraid to take profits from time to time but leave some skin on the table for those multi baggers. Sold some GMXR May 2011 $5 calls (a covered call position) for $1.35/share. This allows me to sell my expensive GMXR shares bought 8/11/2010 at $5.55/share in May 2011 for $5.00/share w/ $1.35/share premium. (Note: It also becomes a derivative play that can be traded for a short term gain on any downward move of this stock which is normal as it finds a bottom) 20% of my position is now hedged that locks in a 20% return on my expensive shares. I believe this will be a multi bagger but it's still a speculative "value" play. The recent EXCO Resources Inc. (XCO) buyout proposal by management (UPDATE 1-EXCO CEO says $4.36 bln bid a bet on assets, not gas - reuters.com )confirms to me that GMXR's infrastructure capital investment already deployed (close to $200 million) has significant value, more than the market is pricing in. It also helps that GMXR owns several parcels of land contiguous to XCO's pruducing wells. Combined with the historical low in NG prices, GMXR could be worth $15.00/share on any sustained move in NG above $6.00/Mcf (in the foreseeable future ie. 2012-2013). New money from the large integrated oil companies are sniffing around the Marcellus shale fields. This signals to me that there is a lot of hidden value still left in many of these domestic shale fields. Paul Sr. is correct that there is value in many of these small E&P companies especially those with proven reserves "in the ground". The hard part is finding the ones that will demand a premium price based on the current market price. I have been lucky to own a few of these companies (like XCO) but have also be deploying new funds in those companies that have recently been the buyers too ( finance.yahoo.com ). Each company has its own story and you can never be 100% correct as to the "true" value of the asset(s). The important thing is to have a little bit of skin in the game so you can be a player too. Finally, take some profits off the table from time to time but remember to let your big value speculative buys ride because the patient investor will be rewarded with a multi bagger. That's where the real money is made and it is quite rewarding to see your "value" hunch pay off. EKS FWIW - I have been wrong on a lot of my hunches too. Just be sure that you throw in the towel on those so you limit your loss of capital and you have another day to play the game.

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