Quarterly Report

Here's a graph of the portfolio's performance for the first quarter:


Since my approach is to invest in companies that have the potential for high returns in the six- to twelve-month range, it's premature to begin assessing the success of that strategy, but given the turbulence in the market, and the high degree of risk in small-cap stocks, I think it's done fairly well so far.

Of the 13 companies I've invested in, I've only made two serious mistakes (Pilgrim Petroleum and GoIP Global), though a couple of others (H3 Enterprises and Blue Star Health) are shaping up to be serious dogs, and the jury's still out on whether the remainder will live up to their potential.

Weekly Summary

What goes up, comes down, as the performance of my portfolio over the past couple of weeks has shown:


I took a loss on Pilgrim Petroleum, just to get away from a situation that was starting to smell very fishy, and the price of GoIP has been suspiciously inflated for weeks, and is now beginning to normalize - but values have been slipping across the board and the losses are mounting.

I expect I'll be in the red next week, and I expect that will be an ongoing situation until the market in general shows some signs of recovery.

Weekly Summary

My portfolio is down to a more reasonable level this week. That's mostly because GOGB is normalizing (after being artificially inflated - high price, low volume) and I decided to cut and run on PGPM, given some suspicious activities I mentioned a few days ago. Here's how things stand now:

My main portfolio (mutuals and big-boards) also took a hit this past month, so I can't justify putting any additional funds into the pennies at this time. I'll ride it out for a while and see what shakes.

Cut and Run

Today, I dumped my position in Pilgrim Petroleum at a loss - something very fishy going one. I'll get to the details in a moment ...


The reason I dumped my shares and ate a loss is that I stumbled across something very suspicious: Two companies have been blasting press releases about Pilgrim. Under the byline of "tradersworks.com" and "tradergains.com," fifteen press releases have been put in under two months, pumping the stock.

I suspected that these were two (of distressingly many) services that companies hire to keep their name in the media, in hopes of attracting attention - and I even suspected they were owned by the same company. Their Web sites showed the same address, and I looked up the address to find it was a UPS store in a strip mall, a few miles from Pilgrim's headquarters.

And it gets worse: I looked up the domain name registrations for those sites, and I discovered that they were registered to someone with the same last name as the CEO of the company. I searched on that name, and found a page on facebook for a young girl who's in high school in the same town as the company is located - possibly the CEO's niece or daughter.

And at that point, it was clear that something is very wrong.

At best, the CEO has set up bogus media firms under his daughter's name to pump the stock - which strikes me as something highly unethical. At worst, the CEO is using this company to embezzle funds from his own company (writing checks to his own daughter as payment for "services").

And to make matters worse, there has been a lot of after-hours movement on the stock, suggesting that someone (possibly the same CEO) is loading up on cheap shares to dump on the market when the value rises.

There may be some reasonable explanation for all of this - I don't know the law or the facts well enough to say for sure that there are any ethical or criminal violations, but even a layman can tell that the situation stinks to hell.

And so, I've dumped my holdings and taken my losses ... and dropped a tip to the SEC so that they can take a look at the situation.

Pilgrim Petroleum Reports 2007 Record Profitability and Performance

In a press release this week, Pilgrim Petroleum announced:

Exceeding expectations, Pilgrim's Net Revenues for the year totaled $410,096 as compared with $1,471,507 in 2006, a decrease of 72% compared with 2006 as a result of debenture of properties last year. Net Income, on the other hand, was $33,725,949 compared with $516,814 last year, demonstrating an escalating increase year after year.

This announcement has had absolutely no effect on the price of the stock, and here's why: the vast majority of this "revenue" is from the sale of properties in exchange for stock in an unknown company. It's not profit (generated by operations), it's not liquid assets (I expect they can't sell the stock to generate capital for a long period of time), and it's probably not worth as much as they claim (they're reporting value at the time of sale, not present value of the stock).

Pilgrim has a long history of making outlandish claims about money they don't have, especially in terms of "estimated" reserves of oil - which isn't profit until it's pumped and sold, and the figures are usually drastically revised (with a great deal less fanfare) at a future date.

In spite of all the grandstanding, I have faith in the company's potential for future growth. Provided that oil prices remain high (and there's no sign of that changing), there's good money to be made in squeezing shale ... and the company has sufficient (legitimate) resources and income to stay afloat until they strike oil. So while the constant stream of outlandish claims may be destructive to the price of their stock, it's of little consequence to the long-range prospects.

Pilgrim Petroleum to Acquire Additional Acreage in Palo Duro Basin

This week, Pilgrim Petroleum announced ...

[The company] has signed a Letter of Intent to acquire a 70% working interest in 8000 acres on Wilbarger County in Texas. This property has a history of great production and significant reserves. …

The Palo Duro Basin prospect, which is currently being evaluated for further development, has been compared to the Barnett Shale discovery. Barnett Shale is estimated to contain some 30 trillion cubic feet of natural gas. Management believes Palo Duro could prove to be one of the largest natural gas deposits in North America.

Given that the company is prone to making wild claims about its potential for profit, I’m skeptical about that last paragraph. However, the acquisition of new land is a promising sing. Given that the company sold off most of its acreage in exchange for stock (in an unknown firm), Pilgrim was beginning to seem more like a mutual fund than an oil company.

The company still has a steady stream of income from the properties it retained, sufficient to cover operating expenses and keep the company in the black while it continues to go wildcatting on uncharted lands, so I’m not overly concerned about them putting all their eggs in one basked. I hope and expect that the Palo Duro property is one of several acquisitions in the coming year.

Pilgrim Petroleum (PGPM)

Company:	Pilgrim Petroleum Corporation
Web Site:	http:// www.apetroleum.com
Purchase Price:	$0.0025
Current Price:	Click Here

Pilgrim Petroleum is an oil exploration company in Texas. They seem to be involved primarily in shale squeezing, a process that extracts remnant oil from spent wells.

When oil prices are low, it's cheaper to buy foreign oil than squeeze shale - but oil prices have not, and probably will not, be low for quite some time, so I expect they will be around for a while. What's more, they are currently completely debt-free and are generating income from several properties to fund their operations.

This is a medium-range stock. I will hold it for this year in hopes that they take off. If they don't, I'll take a look at it again in December to decide whether it's worth holding for another year.