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TMFPostOfTheDay (< 20)

Feeling Violated by ATPG



August 27, 2012 – Comments (11) | RELATED TICKERS: ATPAQ.DL

Board: ATP Oil & Gas

Author: AirForceFool

Exited my position today at a 96% loss. To say that I'm licking my wounds is an understatement... got back a couple grand... lost about half a years salary... not a staggering loss, but I still feel violated, a little dirty, and wondering if I should stop investing...

Soooooo, the only Foolish thing to do is pick myself up by the bootstraps, be honest with myself about what I did right or wrong, and learn.... so bear with me...

Lesson 1: Be wary of companies with lots of debt... this might seem like a no-brainer, but it was easy for me to get a little blinded by each rabbit ATPG pulled out of their hat... see lesson 2.

Lesson 2: Be wary of companies that have magicians on staff... it doesn't matter how many times they pull a rabbit out of their hat... it only takes one failed rabbit out of the hat to sink your investment.

Lesson 3: No matter how much you believe in a company or industry, don't completely overload on it. Even if you know for a fact that silver is going back to $50 an ounce, or oil to $200, that doesn't necessarily mean those companies that operate in those industries are guaranteed success.

Lesson 4: No matter how good a business is, if you don't completely trust management to have your best interests at heart, are they really the best place for your money? Guessing perhaps not.

Lesson 5: Past performance is no indication of future performance... old adage of course, but it's sometimes seems "easy" to read the signs of QE and ECB policy and determine where you think the economy is going... there are a lot of moving parts... and they don't necessarily synch up like they're supposed to most days... see lesson 6.

Lesson 6: The market can be irrational... and can stay that way longer than most common investors can stomach... ATPG could win a suit against the government, ramp up production... blah, blah, blah... but they didn't do that quick enough... I wonder if I'm smart enough to follow a stock after a day like today... pretty darn sure I'm NOT smart enough to follow a stock into and out of BK... which is about 80% of the reason I sold today... even if all the stars aligned, and I spent 4000 hours figuring out how things were going to be (riiiiiiight) and that common shareholders would be made partially whole and I quadrupled my holdings? To what end... only having an 85% loss... yeah... No Thank You!

Lesson 7: The signs were there... shares of ATPG ended the year around $7... at a minimum, I should have lightened my position from 6x a normal position to say 3x. It's always easy, with hindsight, to go back and say what if... but the major flags (like Israel) should have (at least for me) triggered a bell.

Lesson 8: Treat each investment individually. At least as far as the decision to buy or sell... portfolio balance is a different discussion, but don't let your losses or gains in one stock push you in a specific direction on a totally different stock that has different rules. When I thought Greece was going to default, I pulled 80% of my funds out of the market, and the 20% I had in, was invested in gold and silver stocks, physical silver and oil (ATPG). My belief in QE's effect on the markets notwithstanding, I may have made a different decision on ATPG had I evaluated them individually prior to evaluating them as part of my overall portfolio.... like oil AND hate ATPG would have been solid... even if my portfolio had to go without oil for a while while I researched an alternative... which is humorous in a way since my current portfolio doesn't have any oil... sigh...

I could go on, but I believe I've digressed past lessons re-learned on ATPG into simply rambling... for those of you that lost a little or a lot on ATPG, I'm sorry... I feel your pain... I honestly thought there would have been asset sales etc, prior to us finding ourselves here at the end of a long dirt road... funny thing about all this is I'm not bitter... because for me, getting mad doesn't get me anywhere... If I don't learn from this mistake (hopefully enough to gain back losses) what have I accomplished? And how foolish? With my DNDN losses, it was a binary event that I was sure that would come to pass that didn't... that lesson was easy compared to ATPG... so I'm going to soldier on... work diligently on diversifying into some property (which I view as one of the best places for new money under the right circumstances) and try hard to think of ATPG each time I buy a new stock.

The proceeds from the sale went into SLW shares... for those curious.

11 Comments – Post Your Own

#1) On August 27, 2012 at 11:21 AM, portefeuille (98.32) wrote:

Exited my position today at a 96% loss. To say that I'm licking my wounds is an understatement... got back a couple grand... lost about half a years salary

Depending on "couple" your annual salary (couple * $48000) is pretty high ;)

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#2) On August 27, 2012 at 11:57 AM, constructive (99.97) wrote:

While those are good lessons, I'm not sure you are on the path to investing success yet.

Some of the companies mentioned in response to your post include TC (recently issued debt at 12.5% - ALARM BELLS should be going off in your head) and HEK (made a massive mistake in China, now burning a lot of money trying to build a US business from scratch).

Maybe indexing is the right thing for the majority of your money, with a minority going into a few individual stocks.

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#3) On August 27, 2012 at 12:21 PM, Teacherman1 (< 20) wrote:


I am sorry for you loss, which I almost joined in, but not quite at your level.

I was "high" on ATPG in the past (a couple of years ago), but sold out for a profit because I wanted to get into something else.

I put it back on my watchlist, but when they started to falter, I lowered my start price to $4.00.

Someone asked me about it, so I went and took a long hard look and determined that it would take a miracle for them to survive, so I deleted them totally.

If you are not to "tender" at this point, and still want to be in oil, you might want to take a look at AXAS.

They are getting beat down right now, but are profitable, have good future prospects, and are selling for less than PROVEN reserves.

There are some who would disagree with me (some very strongly), mainly because they have a lot of debt, and they have not been able to execute their game plan in a timely manner.

I still see this as a multibagger over time, and have a significant real life position in them.

If you have any interest, I would suggest you go to their website, read the conference call transcript (especially the Q&A part), and you can see there are a number of positive events that will be coming up in the next 6 to 9 months.

I have been adding to my position during this dip.

I have been following them for a long time and am very familiar with them.

The main problem they are having with the stock price, not the company itself, is that they are a favorite target of a fairly large group of "shorts", which goes back to early 2009, when they were going to do an IPO on the "partnership", which AXAS itself was a 45% holder (and had no debt of their own), but had to end up rolling the partnership into the production company, and issue new shares.

This was a direct result of the Lehman collapse, and they have been a short target ever since.

I made a pitch and a strong recommendation to new investors last Oct. when the same sort of thing happened, and they were at $1.86. I should have bought much more than, but was focused on other opportunities.

Don't give up on investing, just reread your excellent list of advice to yourself, and follow it.

Good luck going forward.

The above is JMO and worth exactly what I am charging for it.

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#4) On August 27, 2012 at 12:31 PM, constructive (99.97) wrote:

Air Force Fool's 1st lesson should definitely rule out AXAS. Earnings look good on the surface, but their cash position and free cash flow are terrible.

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#5) On August 27, 2012 at 1:02 PM, Teacherman1 (< 20) wrote:

Thank you MegaShort

I knew you would be posting.:)

You are correct that their cash position and free cash flow are terrible, but they have made a decision to grow the company and not shrink it to improve those metrics.

Since they were unable to sell the assests of the joint venture at an acceptable price, they are disolving the joint venture.

They will be getting some cash out of that, and they will be able to borrow more under their credit line.

They have a couple of "aces" in the hole, in their Canadian properties (which they are being closed mouthed about for now because they want to be able to lease more property at good prices, and are waiting on the pipeline hookups.

They also have increased their Texas assets with a purchase/agreement to purchase properties from a large independent.

They have not yet shown the results from their Balken wells.

With the joint venture assets rolled into the company, their accounting will be a lot easier to understand going forward.

They may or may not sell off some of their assets after the joint venture is disolved, and O&G prices are at a more acceptable level. This would result in a better looking cash position, but would reduce the size of the company, which I don't think they want to do.

Smaller, growing, independent O&G companies tend to be heavy on debt, but as long as they manage that with their available borrowing ability, they should be just fine.

I am not suggesting that AirForceFool, or anyone else bet the ranch, but I do believe that by year end, or at least by the end of the 1st quarter 2013, they will look a lot stronger. Of course, they won't be at this price then.

Since all but a very small portion of their leases are held by production, they have a lot of leeway in what they choose to do, as far as needing to spend money.

I respect your opinion, but I would absolutely not put them in the same category as ATPG.

JMO and worth exactly what I am charging for it.

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#6) On August 27, 2012 at 7:09 PM, Option1307 (30.45) wrote:

Always good to reflect on your past performance, especially important after losses and it takes a lot of courage to admit you were wrong. So +1 to you for doing so and good luck going forward!

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#7) On August 27, 2012 at 8:21 PM, NOTvuffett (< 20) wrote:


First of all, you complained about losing appx. a half year's income on this trade.  This is why everyone tells you to diversify your portfolio.  Eggs in basket thing.

In the second place, you said you rode this investment down to a 96% loss.  Some investments you will win and some you will lose.  Sometimes you just have to take your lumps and put the money toward another investment.  But you should never ride one down to 4% of original purchase price.  Since you sold at that price point, even if you put that in some other company it would have to go up 25 times just to break even.

At one time, I thought ATPG was an interesting company because of their business model.  However, I never did a review of their balance sheet so I never put any money in it (thank God, lol).


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#8) On August 27, 2012 at 9:01 PM, awallejr (56.95) wrote:

Well I touted this stock years ago but had to get out after the BP spill.  I got caught back in but I at least recognized it to be gambling money.  I gambled, and sadly looks like those preferreds will be a wipe.

Diversification isn't necessarily the right thing to do.  It certainly didn't work in '08-early '09.  And gambling was the way to go at least  after March 9 '09 to early '10.  The biggest lesson is if you are going to make a large holding in one corporation give the balance sheet a harder look.

When I lose on a stock I try to chalk it up as a learning experience. 

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#9) On August 28, 2012 at 3:51 PM, ikkyu2 (98.57) wrote:

I don't know how half a year's salary stacks up according to your portfolio size.  In my case, if I lost half a year's salary in stocks, my entire portfolio would be wiped out.  (Wouldn't ruin me; as a California homeowner I am more likely to be ruined by a real estate bust.)

In any case, you do point out that 6x your normal position size was tied up in this stock, which was a small cap when you bought it - cap $300 million-ish, maybe - and that it had a huge amount of debt.  When you buy a heavily indebted small-cap stock you are not investing; you are speculating.  I advise reading Cramer (his first 4 books, Confessions of a Street Addict through Stay Mad for Life), Graham's The Intelligent Investor, and Peter Lynch's One Up on Wall Street and Beating the Street for a really careful explanation of the difference between investing and speculating.  If you want to know how to speculate after that, read Jesse Livermore's Reminiscences of a Stock Operator and see if you believe you have the stomach for it.

Asset allocation, position size, and stop-loss orders are your friends and would have protected you from what you describe as an emotional attachment to this stock that prevented you from acting rationally with it.  MegaShort is a pessimist but he's also good; I would seriously consider his advice if I were you.  That means admitting that you don't have the skillset at this point in your life to learn the lesson whose tuition you just paid.  No shame in that.

If you decide not to give up, you need to elevate your game quick.  Work harder.

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#10) On August 28, 2012 at 7:36 PM, constructive (99.97) wrote:

"MegaShort is a pessimist but he's also good; I would seriously consider his advice if I were you.  That means admitting that you don't have the skillset at this point in your life to learn the lesson whose tuition you just paid.  No shame in that." 

My comments probably came off a bit harsh. As far as I know, AFF has the skills to be a good active investor. Sometimes people need to take some time to cool off and think before diving back into the market.

I occasionally read bogleheads to get another perspective. Although active investment works for a lot of people on CAPS, I also think the average Boglehead has a better grasp on risk than the average CAPS player.

High debt companies don't leave any margin for error.  I believe they should be sold immediately if the company doesn't meet my expectations - even at an unfavorable price.  In contrast, you can be much more patient when holding lower debt companies like MCF, TGC, GPOR, or PSE.

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#11) On August 31, 2012 at 11:05 AM, DollarDiablo (63.75) wrote:

Ben Graham would nod his head while reading the lessons learned. However, with each loss comes experience to apply towards the future. Remember there's no shortage of money to be made out there with stocks, it just takes diligent research and patience to hunt down the gems. take some time to re-focus and then get back out there and channel your inner defensive investor!

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