2012 Stock Picking Contest: Q3 Results

It’s time to update the rankings for our friendly stock picking competition. Each blogger picked 4 stocks (or ETFs) they think will outperform in 2012. Q3 results have improved over Q2 but still reflect the disinterest of Mr. Market in the energy sector.

Eagle Energy Trust (TSE:EGL.UN)
YTD ROI = +8.19% 
In my opinion, Eagle Energy Trust remains one of the best oil weighted dividend payers. The company’s production is 98% weighted to oil, giving it an usually high company-specific, or unsystematic risk vs systematic risk ratio. However, its total payout ratio will end up above 100% this year due to ramping up production from the latest field it acquired. EGL currently sells its oil at a slight premium to WTI contrary to Canadian producers facing double discounts. Haywood securities recently initiated coverage on EGL with a $14 target price.

Poseidon Concepts (TSE:PSN)
YTD ROI = +24.20%
Poseidon Concepts has been the best pick so far this year. I still believe in PSN outperforming this year and the current share price is potentially a great opportunity to add some. Management is working on diversifying its customer base by entering other sectors and the pie is so big I believe it will take a while before its EBIAT margins start to compress.

Palliser Oil and Gas (TSXV:PXL)
YTD ROI = -21.69%
Palliser Oil and Gas is a 98% weighted heavy oil junior producer, it is my personal pick to play the heavy oil sector. The company is executing its growth plans nicely by increasing production and acquiring strategic heavy oil assets. PXL is currently undervalued and so is every other oil and gas producer out there. I still believe it’s only a matter of time before the SP of PXL hits $1 again. Palliser is on track to exit the year at more than 2,800 boepd and potentially average more than 3,200 boep in 2013.

Second Wave Petroleum (TSE:SCS)
YTD ROI= -65.78%
Second Wave Petroleum is the reason I am sitting at the bottom this year. But it was a gamble I took on a takeover which never materialized. In fact, I was surprised that it failed to be an attractive takeover candidate given that an acquirer would have easily seen that its projects would have surpassed any calculations of the hurdle rate formula.

It was either going to be 1^st spot or last spot. It’ll be the last one since the gamble did not work. SCS has a great land position at Swan Hills targeting the Beaverhill Lake Group and has been ramping up its production until they hit their debt limit. Unfortunately, a failed takeout combined with debt destroyed the share price bringing my ROI down in the process. A recovery in price is dependent on strong oil prices because the company is limited in its capital spending.

As you can see from the chart above, the collapse of SCS in Q2 pretty much sealed the deal for last place this year. Europe’s debt woes combined with uncertainty about the global economy don’t help either. It seems as though many investors will be looking to learn how to calculate net exports of goods and services given the impact its had on GDP around the world.

I still hope for a partial recovery in Q4 for PXL especially if the market gets reassured a bit on Europe leaving QE3 to reverse the sentiment of fear.

The competitors also posted their top picks along with the results: