Weekly Performance Update
Here is the performance update for the 2013 EquityMan Prime 58 Portfolio as of the close on Friday, Jan 25,2013:
I have decided to allow myself 12 times a year to make adjustments to the portfolio: the first and last day of each month. This means Thursday and Friday of this week will be the first window that I can close and add new positions in the 2013 Portfolio. I realize I have been busy all month, filling out the portfolio, but – with the exception of Tag Oil – I continue to hold all of this year’s original positions. Stocks are now 65% of the portfolio, with cash down to 7%. Only the materials and precious metals are not showing YTD gains.
Disclaimer: The EquityMan2013 portfolio is a real money portfolio. Tracking of its performance and comments on my buy/sell decisions is provided for the informational interest of family and friends. Others are welcome to follow. However, I am in no way qualified to offer investment advise, and nothing I say or that appears on ResourcefulStrategies should be construed as investment advise or a recommendation to buy/sell any of the securities I discuss.
Precious Metals Sector Update
I have given considerable thought to the price of gold and concluded that gold is neither over nor under priced at its current levels. An article by Curt Freeman in the December 30th issue of North of 60 Mining solidified my thinking. Curt’s article, “Replacement Cost of Gold Startles,” which is based on a CIBC Markets report, breaks out the following per oz replacement costs:
- $700 operating costs
- $275 sustaining capital
- $150 construction capital
- $125 delivery costs
- $50 overhead, and
- $200 taxes,
totaling $1500. As Curt says, “Add a 10-12% profit margin and you are looking at something like $1,700 as the sustainable gold price needed to fuel continued exploration, development and production.” February Gold Futures began the week trading at $1687.00 and closed at $1656.6, down $30.4 or 1.8%.
Technically, gold looked to be correcting out of its bearish posture, but fell back late in the week, following positive economic news. I think gold may be establishing a long-term trading range with current levels as a pivot and upside/downside price movements determined by supply and demand. Holding gold as a hedge against inflation, by central banks and by individuals, is just one variable of total demand. Personal income levels (wealth), particularly in the BRIC countries, should have a significant demand impact. I also think that mine supply is an important supply side variable, though some folks don’t.
Gold miners continue to underperform gold, for several reasons. First is a suspicion that gold prices are elevated beyond a sustainable level. Second is unrealistic replacement cost assumptions, often encouraged by company management. Third is a general distrust of management concern for shareholders. If my hypothesis’s are correct, the first two reasons result from a misreading of the overall picture. Good projects, i.e. those with significant metal and financial resources, run by good management teams, should reward company ownership.
The Prime 58 Portfolio has exposure to both gold and silver. Disappointment this week that gold didn’t break through the 1700 level sent gold along with silver shares tumbling. I added to the EquityMan’s three largest precious metals holding, increased the gold and silver savings account, and added three more gold miners to the 2013 Natural Resources Portfolio. Tracking the gold and silver savings account and the 2013 Natural Resources Portfolio separate from the Prime 58 Holdings lets me increase overall precious metals exposure beyond what I would want in the more balanced Prime 58 portfolio.
Please click on this link to view a performance summary of the Prime 58 Precious Metals Holdings:
Replacing Tag Oil with Tullow Oil
New Zealand Energy, one of last year’s holdings, has updated its exploration and production activities in the Taranaki Basin of New Zealand. Well results were disappointing, and the stock has tanked. Yesterday TagOil announced plans to drill 13 wells this year in the Taranaki Basin. The stock popped a bit on the news, while an open order I had in filled, so I am out for now. Tag Oil will be replaced in the EquityMan Prime 58 Portfolio by Tullow Oil, a good performer last year, which I had purchased for the 2013 Natural Resource Portfolio. Tullow Oil’s stock has remained depressed since my purchase, so I have also increased my holdings.
Weekly Performance Update
Here is the performance update for the 2013 EquityMan Prime 58 Portfolio as of the close on Friday, Jan 18,2013:
Tag Oil, a Canadian oil & gas exploration company operating exclusively in New Zealand, announced this past week that Apache New Zealand would not be continuing its farm out agreement beyond its initial phase, and the stock lost approximately 35% of its value before recovering slightly toward week’s end. Apache’s decision raises doubts about the potential of Tag Oil’s east coast basin unconventional oil reserves. Farm outs are used when a company, in this instance Tag Oil, has an acreage position that a second company, in this instance Apache New Zealand, is interested in acquiring through drilling. The second company foots the bill for drilling and testing, and in return the first company assigns to it the acreage. The first company retains an interest in the acreage and in any future production. Farm out agreements provide a mechanism for undercapitalized companies with good potential reserves to monetize the reserves without undertaking exploration and production costs and risks. Apache did not comment on its decision, and Tag Oil has a sizable land position in New Zealand, including acreage in the west coast Taranaki Basin, where it has drilled several successful wells, produced modest production results, and updated infrastructure. Fortunately, Tag Oil is one of the Prime58’s smallest holdings, and my basis is at a reasonable level. I’ve decided to hold for the time being, but this is the second strike against management in the past six months.
I added another position to the 2013 Natural Resource Portfolio on Friday. Allied Nevada announced record production results last week, but these were slightly below guidance. I took the price decline in share price as an opportunity to add this mid-tier gold producer to my portfolio. I think technicals for gold, silver, and the S&P all look bullish at the moment, so I haven’t been shy about buying stocks this month.
Portfolio Update
This week I bought on dips more shares in two of my holdings, SAP @ 77.87 and RNF @ 44.26; similar orders I placed for FISV and IBM didn’t fill. I also added Alamos Gold (AGIGF) to my 2013 Natural Resources Portfolio @ 15.81. Alamos Gold made an unsolicited bid for Aurizon Mines, causing its share price to fall and giving me what I expect to be a good entry point. If it is successful, the takeover should benefit Alamos shareholders.
Weekly Performance Update
Here is the performance update for the 2013 EquityMan Prime 58 Portfolio as of the close on Friday, Jan 11,2013:
Disclaimer: The EquityMan2013 portfolio is a real money portfolio. Tracking of its performance and comments on my buy/sell decisions is provided for the informational interest of family and friends. Others are welcome to follow. However, I am in no way qualified to offer investment advise, and nothing I say or that appears on ResourcefulStrategies should be construed as investment advise or a recommendation to buy/sell any of the securities I discuss.
Initial Purchase: 2013 Natural Resources Portfolio
I have been deliberating about how to handle a 2013 Natural Resources Portfolio separate from the EquityMan2013 Prime58 portfolio (see my post: http://resourcefulstrategies.com/2012/12/14/tis-the-season). When I decided to expand the EquityMan portfolio to seven stacks, I moved into it the initial five stocks slated for the Natural Resources Portfolio. These are now found on the Canadian Natural Resources page.
Yesterday I decided to treat the Natural Resources Portfolio in the same manner that I treat the portfolio’s savings account. I went ahead and purchased this portfolio’s first holding yesterday, and it is Tullow Oil (TUWLF/TUWOY). London based Tullow Oil was a good gainer in last year’s portfolio, and its share price has since fallen off. Yesterday’s earnings release saw the shares fall even further, even though I thought the costs mentioned as the reason for the drop seemed like normal operating costs to be expected with exploration and development risks.
