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Backing Winners

by The Wrinkle | April 29, 2010

As indicated last week apart from the odd insightful (or otherwise) comment on life, The Wrinkle will endeavour to offer up a few betting picks, which of course includes the share market. Obviously these picks come with the usual all care, no responsibility, legal disclaimer, etc.
To get started, last week's pick was a bet on the Lions to come bottom of the Super 14 table at $1.33. This bet remains live, and given that the Lions need to win two out of their last three games to lose this illustrious position, a change in their position now looks highly unlikely, hence the current odds of $1.13.
My sad story of last weekend was backing the Crusaders on a 13.5 handicap, going to bed at half time when the score was 13-0 to the Crusaders, only to rush back downstairs (after checking my phone) to watch the last ten minutes of the Force taking the Crusaders apart at 24 – 16. A half time bet you can only dream about in hindsight.
Yes, for the observant amongst you, going to bed so early on a Friday night is indeed sad. However The Wrinkle still needs his beauty sleep, some would say more than most.
Last week I also recommended a great article on Goldman Sach’s in Rolling Stone magazine. For those who took the time to read this article, one of the areas highlighted was the manipulation of the oil price in previous years and how a barrel of oil is actually bought and sold 56 times before it’s actually used. If that’s not churning, what is?
Oil can be an emotive subject, people start talking about “peak oil” its close cousin coal, global warming etc. My take is quite simple, there is enough oil and in particular “shale oil” available to last hundreds of years, the issue is simply price and environmental appetite. The current oil price appears to have stabilised and I believe is unlikely to materially fall from here.
There is no doubt that environmental pressure will drive us into cleaner and better alternatives. However it’s probably 10 years to 20 years away at best before these alternatives even approach being “mainstream” options. Sadly maybe even longer given recent political back downs.
The oil play I want to talk about is, I believe, well positioned over the next 12 months to two years, and accordingly is well (excuse the pun again) placed in relation to this investment window. Over recent years technology has allowed for much improved 3D seismic mapping of potential oil fields, and in particular re-working of previous leases. The company I want to recommend has been active in this area in the lower southern states of the US, and has been recently successful with wells around “salt dome” formations.
Golden Gate Petroleum (GGP:ASX) is cashed up from a recent retail capital raising that was oversubscribed by just under 50%, has wells producing and an extensive drilling programme planned over the coming months (hence the capital raising for working capital). I originally came across this stock in David Haselhurst’s speculator (please note speculator = risk, don’t forget the legal disclaimer) column and like him have been following GGP off and on over the years. In my view David does a great job in promoting lesser known, but worthy stocks. Anyway you can all do your own research and see what you think.
I will, however, leave you with one interesting quote from David’s column that your research might not turn up.

“California-based managing director Steve Graves enjoys a reputation for having enriched investors in Orchard Petroleum after he became managing-director in 2004-05 when the shares were trading at 5¢. Within two years it was taken over by hedge fund Crosby Capital at 81¢ a share.”
Everyone likes a winner with a track record (Personal disclosure: The Wrinkle holds 500,000 shares bought at an average price of 3.6c).
That’s more than enough for this week, next week we might stray into more esoteric territory and the 10,000 hour rule, see you then.

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