A popular saying in the stock market (pre-PetroKazakhstan) is that pigs get fat and hogs get slaughtered or something like that. Well, if the hog is PetroKazakhstan Inc., it doesn't (and didn't) get slaughtered. It gets richer than sin.
Just ask Bernard Isautier.
If you bought a piddling 3,000 shares of a wild and crazy speculation named Hurricane Hydrocarbons on Sept. 22, 1999 at 34 cents, long before its name was changed to PetroKazakhstan, and sold them today at $65.76, you'd be clinking glasses of fine French wine with PetroKaz chairman Isautier. Maybe, like the "Petrol Bank of Isautier," you'd even own your own island in French Polynesia.
Personally, when I drink wine, I don't have use for a corkscrew. Having grown up in rural Saskatchewan where you were the toast of the party if you showed up with a gallon of Four Aces, I drink fine screwtop. As for hanging out with Bernie, shoot, I can't even score an interview with the man. And I don't really have much use for a private island where you probably couldn't even get a decent bottle of Carlo Rossi.
So that would explain why, instead of cashing in my 3,000 34-cent shares today at $65.76, I sold my shares in Hurricane a tad early. I am proud to report - now that the nightmares have subsided - that I sold this wee position at 38 cents on Sept. 28, 1999 for a tidy six-day profit of 10 bottles of screwtop wine ($66.02 after commission), much to the chagrin of Revenue Canada, which would have been tickled over the capital gains on a sale worth $197,180.
At that time, selling Hurricane Hydrocarbons was like having a rotten tooth extracted. Booking a profit, albeit $66.02, on this mutt was cause for jubilation. I remember breathing a sigh of relief when some sucker bought my shares. If memory serves, we pulled out all stops in celebrating this winning trade and actually splurged with wine that had been mercilessly suffocated by a cork.
In 1999, almost six years before shares in PetroKazakhstan would fly to the $65 range on a $4.18-billion US bid by China National Petroleum Corp., there was every reason to dump Hurricane. If you're the one who bought my shares, cheers - but, frankly, you must have been out of your mind or drunk on screwtop.
This stock, which was trading on the Toronto Stock Exchange at 20 cents when Isautier became chief executive officer in '99, was an accident waiting to happen and about as secure as a shanty in a hurricane. The company was floundering in bankruptcy protection at a time when the price of oil was at a fraction of current levels, trading in the $10 US range. Of course, stocks in bankruptcy are to be traded, not held - or so goes the conventional wisdom.
Even with Isautier - the shrewd wheeler-dealer who had worked some magic as CEO of Canterra Energy and Canadian Occidental Petroleum (now Nexen) - putting his clout behind Hurricane and stepping into the role vacated by company founder John Komarnicki, Hurricane looked like nothing more than a longshot to survive. Hurricane's interests were in a politically sensitive area - the Soviet Republic of Kazakhstan where it owned the Yuzhneftegaz well, which it had purchased for $122 million.
Isautier, who had initially taken the job with stock options but no salary, negotiated a restructuring of the company's debt with bondholders and a purchase of a Kazakhstan refinery. By 2000, the company had been wrested from bankruptcy protection.
Obviously, the visionary Isautier recognized that there was huge potential in taking a shot at tapping into Kazakhstan's oil. Which, I suppose, explains why he can afford to toast his success with a vintage wine that is somewhat more sophisticated than the screwtop varieties.
The flamboyant Frenchman made $92.6 million from salary and stock options last year and is poised to cash in another windfall on the sale of the company, in which he owns 2.3 million shares.
Yet, even if you believe in the story, one of the most difficult things for any investor is letting profits run in a company with an off-the-charts return. I mean, how do you hold on long enough to rack up a PetroKaz-like, 200-fold return?
Few investors ever get to experience a 10-bagger (thousand-per-cent return), so what kind of logic is there in holding out for a 200-bagger and ignoring the taunts from those pesky little market voices in your head that are screaming, YOU GREEDY SWINE!
In the case of PetroKazakhstan, the company's ongoing skirmishes with the Kazakhstan government made an even more compelling argument to take money off the table during this mind-boggling ride.
Sometimes, if you're fortunate enough to own a stock that has racked up a 100-per-cent gain, a good rule is to sell half your position, knowing that the worst you can do is break even, and let the other half ride.
But if you're a worrywart market watcher, it's inevitable that you're eventually going to pull the trigger too soon. If you've devised a plan to hold a stock long term and wait for monstrous returns, take it off your radar screen. Remove it from your watch list. Erase it from your psyche. Tell the greed-screaming demons to shut the hell up. Forget you own it.
Otherwise, the temptation to sell will eventually become overwhelming.
Yet, while you're beating the bushes for the next PetroKaz, you should also remember that this company's stunning performance is a stock market anomaly that defies the trading textbooks. As grizzled investor Jim Rogers says, "trees do not grow up to the sky" - unless, of course, they are planted by Bernard Isautier. And, yes indeed, hogs do get slaughtered.
Still, as a tribute to PetroKazakhstan, here's a revised twist on an old saying: Pigs drink screwtop and hogs drink 1861 Lafite Rothschild with Bernard Isautier.
Cheers, Monsieur Isautier. Pardon the screwtop wine and styrofoam cup.
HOT STOCK: Corriente Resources TSX:CTQ $3.49 Up 69 cents (+24.7%) on 673,500 shares (based on weekly stats through Sept. 8 for Canadian stocks over $1)
With those copper plays heating up again, Corriente has been one of the leaders, bolting higher on its encouraging copper prospects in Ecuador and pushing toward the 52-week high of $3.95 achieved last October. The Vancouver-based company, which is also exploring for gold in Ecuador, boasts a 135-per-cent return in just over four months.
COLD STOCK: Westport Innovations TSX:WPT $1.31 Down 20 cents (-13.2%) on 947,400 shares (based on weekly stats through Sept. 8 for Canadian stocks over $1)
When Westport recently announced a deal with a Chinese company to produce fuel tanks for the natural gas vehicle market, investors had a gas, putting the pedal to the metal in a brisk two-day rally that boosted the shares 35 per cent. But if you chased Westport on the news, you've had your lunch handed to you. Stock in the Vancouver company has since been running on fumes and it's still a far cry from its 52-week high of $2.44.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)
