An exceptional week for TheShareHUB picks with a whopping 12% gain. The majority of gains can be attributed to PetroMatad – The first to multibag in 2019. With equities lagging behind the recent resurgence in Oil Prices/Gold Prices, TheShareHUB picks had experienced a quiet period over the last few weeks. Short termism has turned the markets into more of an entertainment circus rather than the usual casino with flashing lights. Investors today become impatient all too easily. Like an addict looking for the next fix, Retail investors tend to seek news nearly every other day. Investing can be a rollercoaster, but it wouldn’t hurt a few to take a page out of Mr Buffet’s book and look to mid to longer term expectations. PetroMatad is probably a classic example of the current herd mentality out there across many AIM listed stocks. Last year the share price was trading at 6.5p before the last exploration well hit dust. A disappointing result, granted. But the drop in share price from 6.5p to 1.7p was heavily overdone. PetroMatad at the time had over £15m in cash which equated to approx 2.2p. That priced the multi-well exploration plan in 2019 at zero. But try telling that to a Retail investor in mid November 2018 and the answer you would get would be simple… “Yes.. attractive, but there’s nothing happening here for at least 6 months so I’m off “… is the usual mantra. Followed by… “I’ll come back later next year.” There is nothing wrong with trying to make cash work elsewhere while some stocks go into a dormant period. But is Mid Nov18 to Mar19 really that long to wait? Of course not. PetroMatad’s rise from 1.7p to highs of 6.5p in just under 5 weeks is not a surprise to some, but a mystery to many. The ‘many’ being those that thought they could buy back in weeks before the next drill plans get underway. The trend of late is a telling one. Retail investors are beginning to realise that ‘getting in early’ really can be rewarding and help derisk going into quite volatile share price periods as exploration wells get underway. Other examples like Providence Resources 8p to 16p prove that point. Investors would be wise to seek out stocks that have communicated ‘active’ high impact exploration plans for Q2/Q3 2019. There is always a risk that plans change and the focus on exploration reduces so risk is very much on the early birds side. But the rewards can be significant although it can test the patience of news hungry investors. Many of those seeking constant signs of progress through share price movements can become frustrated and should perhaps look more closely at the company / business and concentrate on the calendar of events/catalyst ahead.
Look out for potential drill result news from Premier Oil (ZAMA-2) and Amerisur Resources (Calao-1). The latter has been treading water around the 17p level and the market appears to be pricing in zero for the Calao-1 well which seems odd considering the proven success at Mariposa-1 and more recently with Indico-1. With more wells to come in and around the CPO-5 block, a duster would not be the end of the world. Infact, the importance is more about discovering (or not) the OWC (oil water contact) as well as seeking potential borders of the oil resource. The next few wells on the CPO-5 block will help define the development plans going forwards and the discoveries to date are already very significant and sizable. Something the market has yet to pick up upon.
Another stock frustrating investors is Columbus Resources (CERP). The stock has drifted down from 6.5p levels to just 2.5p over the last 8 months and this is despite the company doubling production. Dilution has taken place but with an active planned Q2/Q3 exploration phase, the company should soon see some ‘herd mentailty’ return as Retail investors begin to get in ‘early’. CERP need to confirm in more detail the plans for 2019 and that’s the problem at present. Not enough commitment or detail from the company. Solve that, and investors will come. With a market cap of just £21m and approx 1000bopd production, near zero debt and approx £2m in cash, CERP could be the next stock to Multibag from TheShareHUB picks for 2019. Risks remain as always so make sure you do thorough research.
Week 07 – Positions: