In at $4.53, out at $1.16, loss= -74.80% after commissions & excluding dividends.
It’s time for some painful but necessary tax loss selling. I have been happy to publish many many winning trades with substantial returns for some but now its time to publish the losing trades as they deserve their rightful space on this site. While both Perpetual Energy and SkyWest Energy have been my worst investments for 2011, Perpetual energy would stand out as my worst pick because of the following reasons:
- Failure to accurately assess the financial health of the company (as you can see, this has changed significantly this year as I perform cavity searches nowadays on any dividend paying company of interest)
- Failure to estimate the timeline required for the company to increase its liquids production (the dividend kind of makes you complacent, paid for waiting).
- Failure to act on my own belief that natural gas has no hope in the immediate future even though I largely avoided gas weighted companies.
- To a lesser extent, failure to cut the losses early on but that has little impact as I have a good chunk of capital gains to balance so losing more or less doesn’t make a difference in this year’s scenario.
SkyWest is a different story as I failed to detect a management team in distress which is not easy to start with. I learned some fascinating things about the management team from a very reliable source in the industry. Had I known this info earlier, I would have moved on a long time ago. Even before the merger offer came in, a major institutional holder of SKW was trying to sell the company to several other producers who simply turned a cold shoulder which explains why the white knight never appeared. SKW was lost with no hope because of its human element, good thing Marquee put them out of their misery.
If I did not have capital gains, I would have sat on perpetual energy as I still believe it will recover in the long run. Management has been increasing their ownership through insider buying reaching 25% and they can monetize enough assets to fuel their liquids growth if NG prices remain subdued.
Sometimes the sudden death of a family member or a friend reminds us of our own mortality. This is why I keep disclaimers floating around this site, I do not expect myself to pick back to back winners, this is the nature of stock picking. Some of you might have noticed I like to paint my investing with a military flavor as I have studied ww2 extensively years back. The main reason I use ww2 images depicting germans instead of the victorious allies is simply because stock picking is a struggle with mr market where you will always be outnumbered and outgunned. This is part of investing and one has to take his losses, regroup and counterattack on more promising fronts.
Which losers have you sold lately?