Sold two energy stocks today. EOG Resources (EOG) and Berry Petroleum (BRY). Although these have not reached my estimate of their intrinsic value, I revisit stocks throughout the year, generally after holding a minimum of 6 months. Each of these stocks have recently filed new annual reports (10-K’s), so I could now adjust my estimates. EOG and BRY generated significantly less cash flow in 2009 than in recent prior years. While they remain “cash flow positive”, they now fall into a category of stocks where I don’t feel comfortable estimating future cash flows, due to the large variation in flows making the intrinsic value harder to predict. The obvious reason for their lower cash flows is the collapse of energy prices between 2008-09. However, at this point in the market cycle I don’t want to be holding ‘unpredictable’ companies. I hope to re-enter other energy companies over the next few years, some with more stable earnings. I’m locking in an 87% gain on BRY, and a 27% gain on EOG. With dividends, I earned an average of about 60% on these two stocks.
In fact I have a new energy company I’m tracking, need to make a decision on whether to purchase.