Revisiting Our 2012 Wish Lists
In January, workout facilities across America are always packed with people exercising a renewed commitment to, well, exercise. By February, the gyms are back down to their normal volume as people have forgotten or given up on getting fit. Much like going to the gym, our commitment to tracking new stocks at the beginning of each year can wane as we get bogged down with other responsibilities as the weeks tick by. But there are too many advantages to maintaining a wish list to let it just fade into the ether.
Dig out the list
In December, I outlined four energy stocks I wanted to keep an eye on and potentially buy this year: Encana (NYS: ECA) , Kodiak Oil & Gas (NYS: KOG) , SandRidge Mississippian Trust I (NYS: SDT) , and SunPower (NAS: SPWR) . Here's how the group has performed so far this year.
Overall, it's not an impressive showing, but it's not the worst news for me, because I never got around to buying any of them.
Encana was one of the top five natural gas producers in the U.S. last year by volume, but natural gas is too cheap and the company is one of many to limit natural gas drilling to low-cost plays. I am keeping the company on my radar because I want to see whether maintaining strict financial discipline and targeting natural gas liquids production can right this ship.
Kodiak Oil & Gas continues to experience impressive growth and announce equally impressive goals for future production. But it takes money to make money, and the company's debt situation leaves me on the fence for now.
SandRidge Energy's (NYS: SD) situation is much the same, which is why some investors choose to put money into its royalty trust instead, as the trust has no obligation to the parent company's debt. Mississippian Trust I is in a great region for oil production, and it exceeded expectations for unit payouts last year. The question that has come up since I originally considered SDT is whether to buy into SandRidge's newest royalty trust, Mississippian Trust II, which is due to hit the market any day now. For the time being, both trusts remain on my list.
It's not me, it's you
The beauty of stocks on a wish list compared with stocks we actually own is that it's much easier to let them go. Take SunPower, for example. My interest in the solar industry has waned as these companies continue to battle each other while trying desperately to stay afloat. SunPower may be the best of the lot, but the lot isn't making any money and has lost its appeal to me. For now, I'm moving SunPower from my wish list to the back of my mind.
However, it was through my research in SunPower that I found an idea for its replacement.
Meeting someone new
French energy giant Total is a stock I've considered before, and as I researched SunPower, my interest in Total increased. Total is SunPower's largest stakeholder, owning 66% of the solar company. Total also owned solar installation company Tenesol SA, before SunPower bought it earlier this year.
Suddenly, Big Oil's investment in alternative energy became one of my favorite research topics. Here is a safer way to play new energies that haven't reached a stage of commercial viability I feel comfortable with. From Total, my exploration took off and I discovered others. Chevron, of all companies, is the world's largest provider of geothermal energy. Go figure.
Ultimately, because of my initial interest in SunPower, I've been watching these stocks closely, and both of them are now on my wish list.
Making the commitment
Regardless of the many derivations our original wish lists produce, they are more or less worthless if we never buy any stock. That's not meant to imply that decisions should be made in haste, though sometimes even Fools rush in. It just means that decisions should be made.
There are three actions to take with our wish lists: Buy, drop, or remain wishful. And it doesn't hurt to make lists on a quarterly basis. Again, because of the research that comes out of maintaining a wish list, it is sometimes incredibly beneficial to keep a stock on it for a year or longer, provided that we revisit its thesis more often than that.
A completely static wish list doesn't do investors any favors. The more stocks that come on and off a wish list, the more we force ourselves to analyze companies, research industries, and take note of trends. As our knowledge base grows, we begin to recognize intriguing competitors that may well make for better purchases than our original ideas. And if along the way we discover that a company's unique position is not unique after all, we are simply one step closer to finding one that is.
If you're looking for energy stocks to build out your own wish list, you should take a look at "The Only Energy Stock You'll Ever Need." It's a well-positioned equipment provider that's poised to make investors today rich off the next energy spike. Read more about it.
At the time this article was published Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. If you have the energy, check out what she's keeping an eye on by following her on Twitter,@TMFDuffy.Motley Fool newsletter services have recommended buying shares of Total and Chevron. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.