David/ Fund Makeup
I don't know the extent of your fund nor current breakdown in terms
of how much is put where. This is probably not the place to get into
that any further.
However, let me offer a few opinions. Crude oil won't see $10.00/bbl.
I do believe you might see a price range (NYMEX) from $18.00 to
$24.00 over intermediate term and I don't think that is anything to get
excited or upset about. If and when price falls less than $18.00, I would
phase out my oil stocks. Canadian oil and gas companies now know
how to operate efficiently with price at $18.00. Those with inventory
of acreage and good growth record will continue their growth, just at
a slower rate due to lesser use of cash flow.
And what about natural gas. Spot prices in Alberta have been very
low in the near past and they are in a consistent move upward and
still are averaging far less than elsewhere in North America. The
problem here is pipeline availability, especially to US. This problem
is in the process of being corrected. Most analysts feel prices in
Alberta will catch up with that of other regions in about two years.
Still, prices now are allowing for solid growth in Canada. Also, keep
in mind that winter isn't far away.
In addition to commodity prices, look to obtain interest in companies
which are close to 50/50 in terms of oil & gas production. Those are
the companies which will suffer the least in any pullback in the industry.
Having said that, let me note that Richland Petroleum is dominant in
oil and Newport Petroleum dominant in natural gas, both of which I
feel good about. Also, you mentioned Northrock Resources and I must
also mention that I like them quite a little also, and they are currently
oil dominant. I don't have any information on Amber Energy.
For a fund that was previously 60% invested in bonds, I wouldn't be
to fast in acquiring speculative issues. You might want to look into
the oil & gas trust funds that are now very popular. As in stocks, you
must be careful in selection of these also.
Me, I would concentrate on quality junior oil and gas companies. I
would consider Barrington Petroleum, Jordan Petroleum, Morrison
Petroleums, Newport Petroleum, Richland Petroleum and Stampeder
Exploration.
If you wanted to put a minor investment into specutive situations, I
would recommend researching Elk Resources, Lateral Vector Res.,
and Truax Resources.
If you're located in Alberta, watch for company going public named
Tethys Energy Corp. led by Randall Pardy, former VP @ Northstar
Energy. In fact, get a jump start and give him a call inquiring into
investment into his company. His company is well backed by big
names in industry and will be hot in public marketplace.
In regards to large cap.'s, I still like Talisman Energy for solid long
term growth and they also pay a dividend. I have seen articles in
Financial Post where analysts feel company shares are fully priced,
but for long term, I would be buying shares periodically (cost
averaging).
Let me touch upon the markets in general. I think we probably are
in the final stage of a long term bull market. That doesn't mean we
turn into bears now, I'm still very bullish for near term. I think we
will be treading in water for a while and then see a major correction.
Oil and Gas stocks will be strong in this kind of market environment.
Investments in other market sectors will be earnings driven. The tech
stocks just got hit and only those with sound earnings growth have
recovered. The same will apply to other industries. The economic
situation in Canada is also somewhat different than in US. Any major
decline will first be seen in US.
You asked for opinion, gave you mind. As far as allocating investment
in your fund, how about 25% into oil and production companies and
another 8-1/3% into industry related companies. In the later category,
you might want to look at Precision Drilling and Prudential (I think
"Steel", check back in comments at this topic for info on Prudential).
I would also add security by maintaining high percentage in interest
bearing instruments, say another 33-1/3%. Keep the balance in your
other successful stocks (excluding oil & gas) which are forecasted to
maintain growth rate in earnings. Also, keep on top of tax planning.
The last thing I want to mention, keep in verbal communications with
companies you have invested in and, I don't mean investor relations
personnel. Small cap CEO's love to talk to investors.
Because of the nature of this subject, I must stress the point that I'm
not an investment professional. Rather, just an individual investor like
yourself. All opinion I offer is based upon my personal objectives in
relation to investment. As far as my knowledge goes on oil & gas topics,
you must be the judge of my comments and coverage. In all cases,
I strongly recommend you perform your own due diligence and if possible,
get a third opinion. You can catagorize my comments as a disclaimer.
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