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Top Mutual Fund Manager of 2008 is Buying Oil Stocks

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John Schuler

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Out of the thousands of mutual funds available, how many would you guess made money last year?

A few hundred? Maybe fifty? Twenty?

Nope, only one mutual fund focused on U.S. stocks registered a gain in 2008… just one!

The tiny Forester Value Fund, with only $50 million in assets, recorded a 0.4% gain last year. And while that may not sound terribly impressive, it is when you consider the fact that the Dow and S&P 500 both lost more than 30% during that same period.

Tom Forester, manager of the fund, doesn’t see its small size as a negative. “I’ve been reminded,” Forester said in a recent Wall Street Journal article, “that when your assets aren’t enormous, you can get in and out of stocks in a day — or even an hour — that a larger fund might struggle to do in a month.”

Forester picked up shares of Bank of America (BAC) back in July when they were near $18. He then sold those shares when they reached $30 in September. His timing couldn’t have been better. Had he waited much longer, he would’ve been caught up the October collapse that decimated Bank of America’s shares (B of A stock now sits at $6).

Forester attributes the nimble nature of his fund as a big positive in this case, “If I’d had to pace my sale [of Bank of America shares] over a couple of days, even, I wouldn’t have captured that profit,” he said to the WSJ. Instead, Forester was able to sell his entire B of A position in one day.

After buying up shares of the natural-gas producer EOG Resources Inc. (EOG), he did it again. Forester managed to sell most of his shares after the stock doubled, and before EOG started to fall once again.

So, what is Tom Forester buying now?

Well, Forester told CNNMoney that he’s recently been buying shares of Valero Energy (VLO) and Andarko Petroleum (APC).

“Nobody can really tell what’s going to happen exactly with price of oil,” Forester said. “But as oil got closer to $35, many of the stocks seemed more reasonable than they were when oil was closer to $150. Plus, for the longer term, companies are not finding as much oil as they used to, so prices could go back up. Commodities were oversold.”

Forester obviously feels that now is a great time to get into oil stocks. And since he outperformed the market by over 30% last year, perhaps he’s worth listening to.

Here are five small-cap oil stocks with a share price under $10 and a market cap under $400 million. They’re certainly worth checking out because oil stocks could see a big bounce if Forester’s hunch turns out to be right:

Berry Petroleum (BRY) – Independent oil and natural gas E&P with producing operations in California, Utah and Colorado.

BMB Munai ( KAZ) - Independent oil and natural gas E&P with a heavy interest in Kazakhstan.

Gulfport Energy (GPOR) - A small E&P specializing in offshore drilling in the Gulf Coast.

Pyramid Oil (PDO) - Domestic E&P with interests in California, New York and Wyoming.

Vaalco Energy (EGY) - International oil E&P based in Houston with interests in the North Sea and across Africa.

John Schuler

www.pennysleuth.com


January 22, 2009


Rating: 2.0/5 (5 votes)

Comments

sabonis
Sabonis premium member - 5 years ago
My grandmother made money in 2008 because all her money has been sitting in the bank the last 10 years. whoop-dee-damn-doo...one year doesnt mean anything.
DaveinHackensack
DaveinHackensack - 5 years ago
GPOR, KAZ, and BRY all have net debt. Why bother with that during a credit crunch? PDO and EGY both have net cash. I own EGY, but I don't know if I'd add more at these prices. PDO looks interesting.
ccyork
Ccyork - 5 years ago
i would prefer owning companies that have low debt and lots of physical oil reserves

i currently have a limit order for a small starting position in HGT at 14.05 (natural gas)

BPT and XEC also look very interesting

for drillers...PTEN, ESV, and HP

i would be looking seriously at small starting positions in these if they drop below their 52-week lows

i'm not too keen on futures indices right now due to the steep contango, though i also have a small position in RJN, i'm not adding to it right now

any other suggestions?

Dr. Paul Price
Dr. Paul Price premium member - 5 years ago
Knowing who was best in 2008 is worthless information.

Please tell us...

Who will be manager of the year - 2009. That would be worth something.

Please leave your comment:


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