Sunday, February 21, 2010

KOG: $8,000 vs $4,000 investment.

This is purely for investors; it really shouldn't be on the this blog, but I was curious about something I was seeing on Yahoo!Financial messages on the Kodiak Oil and Gas (KOG) board. There seemed to be a group of folks that were positive about KOG and others that were negative about KOG on that board. Whether an investor is positive or negative about a company probably has to do with whether the investor makes or loses money in a particular security, KOG in this case.

Out of curiosity, I did two calculations. In the first calculation, I determined how much money one would have invested and what that investment would be worth right now if one had put $100 into KOG on the first of the month each quarter from January, 2007 through January, 2010.  There were 13 quarters in that time frame, which would have meant one would have invested $1300 in KOG. With $100 at the beginning of each quarter, one would now have 1,236 shares. At the current price, about $2.50, those 1,236 shares would be worth $3,090. One hasn't made much money, but one has not lost one's principal that was invested.

In the second calculation, I imagined investing $100 the first of each month from January, 2007, through February, 2010. There were 38 months from January, 2007, through February, 2010, so that would have been a total of $3,800 invested (at $100 at the first of each month). Buying $100 worth of KOG at the beginning of each month since January, 2007, one would now have 3,159 shares. At the current price, about $2.50, those 3,159 shares would be worth $7,897.50.

On-line brokers charge about $10/transaction, so total commission in the second example would have added $380. One would not have gotten rich doing this but one would have doubled one's investment.

Folks that have lost money on KOG must have bought high, sold low, or bought very high and are still holding.

Some investment professionals recommend dollar-cost averaging when investing. If one is dealing with a) uncertainty; b) volatility; and, or c) a questionable boom, one might consider dollar-cost averaging when investing.

Kodiak was granted its first permits in North Dakota (in the current boom) in 2006. Kodiak was granted three permits in North Dakota in early 2006 (February, March, and July). Kodiak announced the results of their first two wells (on three of those permits; one permit was not drilled) in 2007 (February and April).

(You know, doubling your money over 38 months isn't all that bad.)

2 comments:

  1. I am playing this as you point out,
    but with Fridays. They seem to be down days.
    Of course I believe the best is yet to come.

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  2. Thank you for stopping by.

    I think 2010 will be a watershed year for North Dakota oil -- hitting new records in all areas: # of rigs; total amount of oil produced and shipped; dollar amount sold; IPs; any way one wants to measure it.

    But share prices are separate from their companies; all things being equal, share prices reflect what folks think the shares will be worth six to twelve months in the future. I try very hard not to make recommendations on investing, but the biased (and wrong) information on the Yahoo KOG message board was so outrageous I had to check it out for myself.

    The oil industry is very, very volatile and those putting money into it should be prepared for the worst.

    Anyway, I wish all the best luck in the world. As for me, I just love following the Bakken and trying to share information in a relatively unbiased manner.

    It should be noted that I am irrationally exuberant regarding the Bakken and everything I write needs to be a) taken with a grain of salt; or, b) cross-checked for accuracy. I try to do my best, but I do make mistakes.

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