It’s been some time since I last posted on the blog, and so far, 2010 has been a very good year. I’ve made significant profits with Encore Oil (LON:EO.), Dana Petroleum Plc (LON:DNX) and Caledon Resources Plc (LON:CDN) , [and a missed out on a few by selling too early]. Recently, after trimming my overweight holdings, I’ve noticed a lack of suitable oil shares to invest in as many have multi bagged over recent months. I think that this has a bubble feel to it and therefore I’ve decided to increase my cash position and stay invested only in larger cap oil stocks or smaller ones that have cashflow (and not rocketed). Don’t get me wrong, I think some share price increases have been warranted, but I’m wary of many increases.
For me, this is a strange position as I’ve always been fully invested - but after my large losses in 2008 (only now recovered from), I’ve decided to take a more cautious stance by looking at position sizing and having a larger cash position.
Today, I read an excellent post on JTCod’s blog on ADVFN which neatly summed up my thoughts. JTCod is not the usual ADVFN ramper and is someone who is worth listening to. I’ve picked out the key points in his post below, but the whole thing is really worth reading :
They are myriad and 10 baggers are common place over just the last 20 months….
It’s all too easy and the big risk is with those [commodity] stocks that have yet to achieve cash flow. Just like the dot.com bubble. If you are a micro cap in that situation you are a real high risk proposition right now because in a crises no-one will be interested in offering new lines of credit to a minnow non-producing miner or oiler….
The irony here is that investors have been ploughing into commodities as a hedge against a falling dollar but those very investors may find themselves standing helpless as the company’s cash reserve value and Exploration plan dissolve in front of their eyes forcing them to come back to the market when the share price has fallen 90% and…
