Derek Pain: I'm biding my time before any Amerisur plunge
No Pain No Gain
Friday 15 March 2013
I have never been particularly keen on resource shares. During my 50-plus years attempting to appreciate the City's often peculiar ways, I quickly came to the conclusion that they were far too risky. Indeed some minor oil and mining stocks seem to exist merely to soak up cash from their shareholders (and others), offering little, if anything, in the way of returns.
If any element of the stock market deserves the casino sobriquet it is the sector housing minor resource shares. For many years I refused to be sucked into what is little more than investment gambling. I know investing in any small company – even some big ones – can be speculative but there seems little doubt that the risk-reward ratio when it comes to the minor resource stocks, often operating in politically unstable countries, is heavily weighed against the investor.
But there is no doubt that resource shares, despite past disasters, have achieved a strong, not to say diligent, following in the past decade or so. Advanced technology has, hopefully, reduced the risk aspect of exploration and some spectacular profits have been garnered by investors who have been brave and fortunate enough to land on winners.
Although my embedded instinct was to continue to avoid explorers I felt the no pain, no gain portfolio was missing out by completely ignoring them. So it alighted on Nighthawk Energy, an oil and gas group operating in the politically safe United States. A 44p investment quickly shot to 107p. I was happy to achieve such a success. But my joy turned to sorrow as Nighthawk stumbled and the portfolio sold at a heavy loss. The shares as I write are around 3.8p.
Undaunted I decided to have a fling with Northern Petroleum. A 68p purchase went to around 95p before the stock market experienced doubts and my second oil venture is now one of the five lossmakers in the portfolio. I am still hopeful that Northern will come good and there are some high-flying estimates that should support my view. In the meantime I cannot help wondering whether I have enlisted another disappointing stock.
But hope springs eternal. Much to my surprise I find myself considering another oil play. I have yet to make up my mind whether to recruit Amerisur Resources to the portfolio but I must say the South American-focussed oil and gas group seems to have plenty going for it.
Amerisur was off my radar and my interest stems from a reader who drew my attention to the group. He clearly believes it offers a rewarding future. I must admit I found his enthusiasm infectious. But I cannot help wondering if the shares are up with – even ahead of – events. They are hovering near their peak at around 49p, having risen from 5p since 2009. Since May the price has climbed from 20p. At 49p the shares are selling at a stratospheric times historic earnings. But that mind-boggling ratio comes down to 15 if, as stockbroker Oriel Securities predicts, last year's profits emerge at some $61m (£41m). For this year about $206m is forecast. Oriel has a 62p target price.
The group is no longer a tiddler, enjoying a £503m capitalisation following the share upsurge. It operates in Colombia and Paraguay, where it has exploration and production assets. The chief executive is John Wardle, who has many years' experience of South America and its energy potential. He is expected to attend a City investment lunch next week. There is speculation about the group's future newsflow with suggestions new exploration exploits and indications of higher production will be announced soon. It is believed Amerisur has the ability to sharply increase not only its production but the amount it sells.
It does seem a nice story. And despite the strength of the shares the portfolio may yet invest. However, I think it prudent to wait for the bullish bulletins the stock market – and my reader – are convinced are on their way.
Until then the oil interest will be confined to Northern Petroleum. It has production and exploration interests in Britain and Europe but its popular claim to fame is a tiny interest, just 1.25 per cent, in what could be a rich field off the coast of – yes, South America.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Questions of Cash: What are my rights if my leak is caused by neighbours’ roofs?
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
Best savings rates are not all they might seem
How to start your own internet business
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
- 1 The Boy in the Dress, TV review: David Walliams' Boxing Day treat is a celebration of being different
- 2 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 3 Andy Murray takes to Twitter to show off his Christmas jumper
- 4 Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
- 5 Top 10 travel destinations for 2015: From Haiti and Alaska to Namibia and Iceland
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens