Occupation: Geologist, writer of Big Picture Speculator Newsletter.
Portfolio: Wavefront Technology Solutions, Resverlogix Corp., Western Zagros, Potash One
Investing History: Graduating in the mid-eighties when the oil business was in yet another slump led geologist Jim Letourneau to look at longer-term commodity cycles. In theory, they can last 10 to 20 years, he says, "And the logic behind them is pretty consistent."
In short, when prices slump, there are large-scale layoffs and expertise is lost, and nobody drills or builds new mines because the returns just aren't there. The thing he really likes is the long time it takes to build a mine or develop an oil sands plant, which can mean a huge demand for existing producers and their stock.
The Lure of Long Term
These days, Mr. Letourneau is more interested in companies with a longer-term story for a simple reason: "I don't want to sit in front of a computer all day." While he's tried swing and day trading, he says it's hard to invest that way if you're not in tune with what the markets are doing every day. "If the big picture still holds water, your patience will be rewarded."
What He Looks For
Mr. Letourneau often judges companies by the company they keep. For example, it's a good sign when a little uranium company like Pitchstone Exploration Ltd. partners with Cameco Corp.
If the company is working with new technology, he also wants to know if the key people have degrees, and whether they've taken the time to write any academic papers. "Really greedy people aren't going to spend time to write non-promotional papers," he says. "Usually if it's something with merit, there will be some sort of academic pedigree."
In 2005, Mr. Letourneau fell in love with Edmonton-based Wavefront Technology Solutions Inc., which deals in enhanced oil recovery. "They came up with a novel way to inject fluids, which can be water to push oil up, or remedial fluid to clean up contamination at old refineries." The stock has given him a wild ride, from under 15 cents to near $5. "I'm learning those types of stories can take a long time to come together."
Exxel Energy is an example, he says, of where knowing too much about a sector can be a drawback. "It totally played to my training as a geologist because I could understand the story." The story? Exxel was going to use modern technology to try to extract gas from a known accumulation in the Columbia River basin in Washington State. But his $3 shares eventually were sold for the equivalent of 15 cents, as the company morphed into XXL Energy. "I still believe there is tremendous natural gas potential in the Columbia River Basin but I'm not going to be lining up to back that assertion with my own money."
"Try not to get sucked into a good 'story.' " Most of the time it's a well-meaning tip from a friend, he says. "They tell you they love this company, and then when you get together a year later, they say, 'Well that didn't work.' That can get expensive."
Special to The Globe and Mail
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