Portfolio review of the week - 8th January 2011

My first week after returning to writing the Contrarian Investor UK blog has been a good one. It was a difficult decision to restart posting given the constraints on my time but I have been encouraged firstly by the portfolio performance, by the significant traffic coming to the site and some of the positive comments left by readers. As with any blog, you sometimes hit the wall of despair, but for now I will persevere with posts and see how the thing goes.

I have thrown my usual rules of portfolio diversification out of the window at the moment with my substantial holding in North Sea oil company Xcite Energy (XEL). Whilst being reckless in some respects, I have not found such a compelling risk/reward ratio on an AIM stock for a very long time and in particular  the share price weakness following the excellent flow test results for the Bentley field was one of those rare"once in a lifetime" investing opportunities.  Despite being massively de-risked at the point that Xcite announced a flow test of 2900 barrels per day i.e. of field commerciality,  I could pick up shares for around 350p, only 20-30 p more than when the shares had a huge risk of failure still hanging over them as investors waited to see if the company could actually extract the 160 million barrels of oil plus from the field. The market makers had a field day, as private investors piled out of Xcite in the New Year in to other stocks. I had not imagined that I would be able to buy Xcite for less than 400p following flow test results this good, but sometimes the markets aren't logical and that's when easy money can be made.

So next week will be an exciting week for Xcite. The oilbarrel.com conference next Thusday the 13th and the deadline for the signing of the rig on the 15th make me believe that it is very likely that we will see at least 2 RNS's - 1) an updated CPR (competent persons report) to upgrade the Bentley field oil reserves 2) signing of the rig contract with a timeline for the start of field commercialisation. The board of directors have been expert in managing the flow of information to investors and I'm sure they won't less us down now. The share price rebound yesterday and Thursday seems to illustrate that I am not alone in expecting some good news update early next week.

Of course we're already seeing rumours swirling of Statoil bids etc. I'm sceptical about these so early in the game but I guess you never know. Perhaps someone is thinking in an M&A department somewhere that they can pick up Bentley on the cheap.

Greenland gold miner, Angel Mining (ANGM) also had a strong week. With the share price close to breaking 7p, up from 5.5p, for most of it. I am awaiting the BBC documentary about Greenland on Sunday night with interest which features their Black Angel zinc mine. Though my holding is far less large than Xcite, I am confident that as the year progresses the share price will continue to move up albeit  with some volatility. This is the way with these sub 10p AIM stocks.

Finally, as I posted yesterday, I have made a speculative investment in Cameroon oil explorer Bowleven (BLVN) as further results from its Sapele 1 well are imminent. Though there is a risk in this investment if the company update is disappointing the downside risk is somewhat minimised by the RNS's already released in November about the size of the existing discovery. The potential upside could be massive, so a cheeky spread bet was placed and though I have less confidence than Xcite the risk/reward ratio looks good.

Once Xcite reaches my target price I will look to move funds into other stocks on my watch list assuming the market corrects enough for me to take advantage of any compelling valuations. However, for now I wait for the arrival of next week with great anticipation with all the potential news flow from all the companies in the Contrarian Investor UK portfolio. Keeping my fingers crossed for a champagne week to ease the winter blues!