NOG -- Dollar-Cost Averaging Since Inception -- The Bakken, North Dakota, USA

NOG has a most unique business model. I first talked about NOG's business plan two or three years ago. 

For analysts who follow the oil industry very, very closely, this should be the easiest oil production company to project earnings and share price target; think of NOG as a trust but with some interesting twists. US oil trusts, once established, cannot add more wells. NOG, on the other hand is not constrained. A lot of wells are going to be drilled on NOG acreage over the next 20 years. 

Be advised of the disclaimer for this blog at the sidebar on the right. This is not an investment site.

This is just a bit of rambling that would rise to the level of a Saturday morning discussion at the Williston Economart. This is not a recommendation to invest in NOG or any other company mentioned. I have owned shares in NOG off and on but do not hold any shares now and have no intention of buying any time soon.

I am an investor, not a trader.

I am probably the only one who still recommends dollar-cost averaging investing: investing the same amount each month.

I was curious how this would have worked out for Northern Oil and Gas (NOG) which was founded in 2007.

Just for the fun of it, using Yahoo!Financial, I imagined investing $100 in NOG at the beginning of every month starting on May 1, 2007, and going through January 1, 2012.

The total amount invested would have been $5,700. The investment would have resulted in 727 shares of NOG which on January 23, 2012, would be worth about $19,000. That's more than tripling one's investment in less than five years. Okay. (This was done quickly; numbers not checked; your results may vary.)

One can also compare investment returns among various companies on Yahoo!Financial. I compared NOG's five years with the past five years of several different companies. Yahoo!Financial returned these numbers:

• NOG: 580%
• AAPL: 380%
• CLR: 400%
• MSFT: 0%
• CVX: 50%
• WLL: 150%
• T: -20%

Oasis has been around for less than two years; for two years:

• NOG: 120%
• OAS: 120%

An investor who watched the market closely and took advantage of the pullbacks could have done significantly better. Some pullbacks have been significant.

NOG's business model is unique in the Bakken. I discuss it elsewhere on this blog and there are numerous investment sites that have talked about NOG, and have recommended NOG, over the past few years.

I could have picked any company in the Bakken, but of those I checked, NOG was by far the best, barely beating CLR, and significantly beating WLL.

T and MSFT paid dividends which changes the parameters. NOG does not pay a dividend.

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I wrote the piece above yesterday.

Overnight I got to thinking about this again. Since 2007, had one put in $100/month (plus $9.95 commission/transaction), one would now have almost $20,000. Makes me wonder why I didn't do that. Smile.