Tuesday, August 25, 2015

Recent Sale – PHX Energy Services Corp

As outlined in my recent entry ‘My Three Most Costly Stock Picking Losses’, the price of my shares of PHX Energy Services Corp plummeted over the last year along with the price of oil.  As their revenue from drilling wells declined, the company decreased its dividend twice in 2015. After reviewing their Q2 results, which saw revenue down 42% year-over-year, and a growing net loss, I was surprised management didn’t eliminate the dividend entirely. Instead of potentially watching this company file for creditor protection, I decided to sell my shares and exit my small position in the company last Friday.

As much as selling shares at a low point in the market bruises my ego, I felt relieved after exiting the position.  PHX was the one company in my portfolio in which I had zero confidence in their long-term sustainability.  I spent an inordinate amount of time scanning news items in order to monitor their financial health. Although I don’t have any concrete plans to redeploy the capital from the sale of my position, I can assure you that it will be invested in a much less risky company.

I’ve mentioned in previous entries that I don’t mind making investment mistakes, so long as I learn from them. My two main lessons learned from holding PHX are that:
-          When entering a speculative position, have an exit plan in place, and follow that plan.
-          Avoid entering into speculative positions in the first place. As I narrow my portfolio holdings, I have to get better at waiting for opportunities to buy great companies at fair prices.

Here’s hoping you are able to learn from my mistakes and avoid including speculative companies in your portfolio. 

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