This is a great - although happenstance - pairing. Both DWSN and GEOS are in the same general business. Although I’m going to try and characterize the businesses, please realize I am no expert on the industry in general or the companies in particular. Oil + gas companies buy 3-D data regarding the land where they have drilling rights. These “maps” help them locate drilling rigs appropriately. DWSN fields crews with sensors and huge thumper trucks. The sensors are strategically placed and then the trucks pound the surface, sending shock waves through the ground (sometimes dynamite is used to initiate the shock waves). The waves propagate differently depending on what’s in the ground (i.e., rock, oil, gas, etc.). DWSN collects the data but, as I understand it, doesn’t own or process it. GEOS - at the risk of grossly oversimplifying their business; I’m sure I am - primarily makes the sensors, although they also make sensors for characterizing offshore oil fields. After the sensor data is collected, sophisticated software generates the 3-D maps.
What went wrong and what can I do to prevent recurrence?
First of all, I bought DWSN near a cyclical peak in 2005 (and GEOS just a few months later). I had little exposure to the energy sector and felt that “some” was appropriate. Bad timing got me off on the wrong foot.
I LOVED Denny’s point that cyclicals aren’t LTBH (long term buy hold) investments. It was a light bulb moment for me. Maybe it shouldn’t have been, but it was. Thanks, Denny! Since LTBH is my preferred investing method, maybe I should avoid cyclical industries, or at least de-emphasize them. They seem to require a bit more agility and ruthlessness than I possess. (Know thyself!)
I relied on a TMFer for my news about these companies. That isn’t a problem, per se, this guy is prolific and a knowledgeable industry insider. At the time, I was really too time-constrained to keep up with what he was posting. I think this last issue is one where I’ve begun to make strides. I have many boards marked as “favorites”, mostly for stocks I (or a family member) own or anticipate potentially owning. If one summed up the unread posts of my favorite boards on the day I retired, the count would have been about 90,000. That doesn’t mean I’ll read EVERY post. Sometimes I’ll only read some number of well-recommended posts before moving on to another board. But it was a ridiculous number. Through diligent reading in retirement and removal of some holdings and watch list stocks, I’m 70% of the way towards being caught up (despite adding Saul’s “prolific” board late in '15). As I recently read the historical DWSN and GEOS posts, I can see how trouble brewed while I wasn’t paying close enough attention. This is still unfinished business for me, as I need to continue getting caught up and also try to rein in my portfolio to a size that aligns better with the time I have for such research. Sadly, I find that I still have difficulty saying no to “shiny new objects”. I bought two new positions this morning - of course I can’t say what they were yet, but I think I’m being sufficiently vague if I reveal that both stocks have received at least one mention on this message board since its inception. That narrows it down to some several hundred stocks, I guess. I recall that I wanted to own fewer companies by year-end '16 than I did at year-end '15. I’m pretty sure I failed at that. One of the side projects I’ve mentioned will likely expand my list rather than contract it (I’ll be happy to discuss it at a future date - it’s an interesting project - but it’s too half-baked right now). In any case, maybe I just need to shoot for fewer companies at year-end '18 than year-end '17. And keep catching up on my reading!
My last point - and this is an important one - is that I was mostly focused on gaining industry exposure and (especially in DSWN’s case) I paid insufficient attention to how these companies made money throughout the oil commodity cycle. One clever observer noted - and I wish I had read that post in a timely fashion - that, in good times, DWSN spends excess cash upgrading its equipment to keep it competitive, leaving little to nothing for shareholders. In bad times, DWSN hoards cash to keep itself alive, leaving little to nothing for shareholders. Remind me how I’m supposed to win here… Know how your company makes money and exactly how you will profit from that as a shareholder.
DWSN is in a taxable account, so I’ll likely want to wait to recognize the loss until it’s advantageous for tax purposes. GEOS is in an IRA and probably will be gone before year-end '17, likely sooner. I caught up on both my DWSN and GEOS reading not that long ago… When I retired ('13), the oldest unread post on both boards was 2007, Ouch!
Thanks and best wishes,
TMFDatabaseBob (long: DWSN, GEOS)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth