PSA 17.0% 4.4¢ petsec energy limited

spender's retreat...not a winnning strategy

  1. 1,317 Posts.
    Been thinking about "spenders" decision to take a profit on PSA . I think he said in his post that over the past few years he had been down as much as $40,000 but now that he was up $20,000 he was taking his money.

    I said earlier that I could understand someone wanting to nail down some profits but now I am just wondering whether "spender" was guilty of making a very common mistake of holding on to a losing stock ie. not exercising a stop loss and then taking a small profit once the stock turned around. In other words keeping losers too long and getting out of winners too early.

    There was no reason for "spender" to be down $40k. I know how easy this is to do, having been guilty of it myself, but I have come to realise that if you are going to make money in the stock market you have to cut your losers early and let your winners run. In fact there is money to be made by buying more of a winning stock or "averaging up" not getting out.

    PSA is a stock that has the potential to double or even triple in the next twelve months depending on further drilling success and the continuation of strong gas prices. It is currently netting $A1 million a week and this is likely to continue for at least a year or two. So holding this one while keeping a trailing stop loss of 5, 10 or 20% depending on your risk profile and the price at which you got in, seems likely to be a winning strategy.

    Keep in mind that PSA has moved up from the low 50 cents to over 60 cents without any news from the company apart from the earlier announcement in mid May that recompletions at West Cameron had been successful and the field was back in production. We should hear soon that rigs had been contracted for two new wells at West Cameron and know the date for the spud. And each month that passes brings us closer to Vermilion and China, two very significant potential money earners for PSA.

    So it is like the old Mortein add, " when you are on a good thing stick to it".

    Cheers all JBC
 
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