(Public) Memo - A Journey Down Memory Lane And The Crawl Back Up

By: Wilson

I have been in the energy investing business for just under a decade (~9 years), and I've received my fair share of criticisms through the years. I look back on some of the stock picks I've made (CRC, BXE) and I wonder just how can someone be that dumb in making those stock picks.

As I look back on this journey so far and the stock picks I've made, the reality is that I was just not focused on the right things. I did not have a regimented process, I did not have the discipline, and I did not wait for the fat pitch.

Walk down memory lane...

Going into 2020, we were long CRC (California Resources), and despite the many warning signs, we stayed long. The backdrop of the story was that we first went long CRC in 2017 at around $7 believing that it was heavily torqued for higher oil prices. Trust me, it was.

Then we rode it up to $45 in 2018 (didn't sell) and thought we were the king of the world only to get punched so hard in the face that you don't even realize what you look like afterward.

Heading into 2020, I thought, finally, the physical oil market tightness would translate into higher oil prices, then wham, COVID hits, and all hell broke loose. CRC went into a freefall, and we capitulated at $1.31.

Thankfully, not all hope was lost. The entire energy sector was dragged down with it, so relatively speaking, I had a way back. I took the entirety of the proceeds and allocated 75%/25% in MEG.TO and CVE. And today, I finally said goodbye to MEG.TO selling it at C$33.56 for a gain of 2,584.8%.

And on Monday, I sold the CVE position at a gain of 1,178%.

Cumulatively speaking, the 75/25% split generated a return of 2,223.1% or the equivalent of ~$30 CRC. While it's still far from the highs we reached in 2018 ($45), I clawed some of that back.

You don't have to make it the same way you lost it...

I think the moral of this story is that you don't have to make it the same way you lost it. Like the famous George Soros saying, "Live to fight another day." In the business of investing/trading, you have to live for you to have a fighting chance to make it back. And I look at this traumatic experience as just an extremely important learning lesson.

A commitment to be better...

I am going to make mistakes in the future, I am certain of that. But I would be the biggest fool in the world if I didn't learn from those mistakes. I think I look back on all the mistakes I've made so far, and I can honestly say that I've improved. I think subscribers and readers alike may have noticed the dramatic tone change in articles over the years (2018 vs today).

On a personal level, the journey so far has been turbulent and treacherous. After battling depression in 2018, it was a long road of recovery, but I think I'm back now.

And as I look at the oil market set up for the years to come, I do think the structural capex deficit that we saw from 2014 to 2020 will translate into a structural supply deficit. US shale oil production, or mainly the Permian, is seeing growth rates dramatically slow. And once this growth engine goes away coupled with global oil demand steadily increasing (despite consensus belief that it will peak by 2030), the oil market tightness will be here to stay.

So with this setup in mind, I think the commitment I will make to you is that 1) the process of analyzing the oil market will need to improve further and 2) we need to have the entire energy sector covered and every rock turned.

Hopefully, we can all revisit this MEMO in a year from now and say, "We saw a dramatic improvement."

Sincerely,

Wilson

Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.