Portfolio review of the week - 5th March 2011

After being in positive territory for much of the day, the FTSE 100 fell back towards the close as the DOW Jones moved firmly into the red. The FTSE 100 closed down 15 at 5,990, down 0.2% on the week. The Dow Jones Industrials finished down 88 at 12,170, but still up 0.3% on the week.

Rising crude oil on continued turmoil in Libya worried investors. WTI (West Texas Intermediate) crude moved close to $105 a barrel (up 6.7% on the week) and Brent Crude moved above $116 a barrel as reports came in that that clashes between Gaddafi's forces and rebels were occurring at the Ras Lanuf, a major oil terminal, in Libya. On a positive note, the U.S. unemployment rate dropped to 8.9% in February, the lowest rate in almost two years, with the addition of 192,000 jobs. But investors are concerned that corporate earnings growth may be curtailed by the extraordinary rise in the oil price in recent weeks. It seems likely that the U.S. Federal Reserve will maintain low interest rates to maintain economic growth despite concerns about inflationary pressures. 

It has been a week of fairly heavy trading in the Contrarian Investor UK portfolio as I have tried to free up funds to take advantage of the plunge in the share price of Xcite Energy mid-week to around the £3 mark, which was a buying opportunity not to be missed. I sold some Sirius Minerals (fortunately at the week high) and my Encore Oil position to fund Xcite. Overall a much better week after an awful February, with the market seemingly wanting riskier stocks in AIM again after weeks of selling off.

Xcite Energy (XEL) - Xcite had a great finish to the week, closing at 339p, up 8.5p on the day. On Wednesday the shares flirted with the £3.00 level on false rumours that the forthcoming reserves report was being "fixed" and that the flow test completed in December was flawed. It was a classic "bear raid" with the shares being pushed down by the market makers. On Thursday we saw the inevitable bounce and after buying heavily on the dip, I took some profit yesterday. I have tucked a good chunk away in my SIPP (Self Invested Personal Pension) at £3.01, since with production only 10 months away (at 15,000 barrels a day), this share will be going 2-3 times higher I am sure. In the medium term (i.e. less than a month) we are likely to see the Reserves Report and then the CPR (competent persons report). A great lesson for investors not to get spooked by nonsense rumours on the bulletin boards. Be sceptical of anyone, even if they appear "in the know".

Encore Oil (EO.) - Though the North Sea explorer announced it had spudded two wells this week, I have sold my position in Encore on Friday at a profit to increase my holding in other portfolio stocks, notably Weatherly International. I believe Encore is a great stock to own, but having analysed the current market capitalisation, exploration upside is needed to drive a further appreciation in the share price i.e. the oil finds to date support the current share price, but there does seem to be a big discount. I will buy back in on any weakness since its drilling prospects look enticing. 

Weatherly International (WTI) - A bit of a sell of in Namibian copper producer, Weatherly, late in the week meant it was time to increase the holding. With over 4000 tonnes of copper due to be produced by the company this year (with a selling price of over $9000 a tonne), revenues will begin to increase significantly in the second half of the year. In addition there is considerable upside from projects due to come on stream within the next 18-24 months. I am struggling to see why WTI is not significantly higher than 12.5p, especially when its operations are in a relatively benign part of the world (and the Namibian government own nearly 9% of Weatherly derisking further). I guess a watch and wait on this one for now!

Solomon Gold (SOLG) - A big sell off in Solomon Gold this week meant it hit 26p. I have been initiating a position this week on this decline and believe the company offers good value given its exploration prospects. (see previous post - http://contrarianinvestoruk.blogspot.com/2011/03/solomon-gold-solg-is-based-in-brisbane.html)

Rockhopper (RKH) - Good to see a nice 6% bounce to 246p as the big seller finally seems to be out of the way and the results from the 14/10-4 well loom ever closer. I bought a little more yesterday as the momentum on this stock finally seems to be turning positive after a drop of more than 40% after the 14/10-3 well in February. 

Bowleven (BLVN) - A very strong week for Cameroon oil explorer Bowleven, with the shares rising 7% on the week to 359p. A couple of weeks ago they had dropped below £3.00, and were completely oversold given the prospects. A Goldman Sachs conviction buy addition finally turned the corner and its been up ever since. I took the opportunity to sell some BLVN to invest in SOLG, RKH and WTI.

Sirius Minerals (SXX) - Nothing new to report on Sirius. A volatile week though with the shares closing at 14p, 7% rise on the week. They hit 15.5p on Wednesday, triggering a sell which was invested in Xcite Energy.