Portfolio manager, Malcolm Graham-Wood, has recently published his list of stocks for 2018 and there are six new names. Of the 14 stocks last year, two disappeared; Ithaca was taken over and Bowleven was removed.
Agitation in any portfolio is not uncommon, but when dealing with small-cap stocks, there is likely to be more movement than with large cap portfolios.
Takeover activity in particular is a risk, despite the obvious benefits in terms of a rise in the share price of the acquired company. Less beneficial to a portfolio is when a company goes into liquidation, or continues to trade under curtailed circumstances, such as when operational performance undershoots expectations.
Small-cap oil stocks that are in the process of drilling represent considerable risk, but that is the point of a broad spread portfolio put together by an experienced portfolio manager. There needs to be just one or two big performers in a balanced portfolio that can carry profit for the failure, or underperformance of many of the other stocks chosen.
Of the stocks that survived from 2017, Malcy chooses to look at Jersey Oil and Gas, FAR Ltd, SDX Energy and Hurricane Energy. Hurricane was a ‘very poor performer’ in 2017, but Wood explains what happened, and why he is pinning his hopes on that particular stock to outperform in the future.
IG will return to the portfolio later in the year for another update.