Ripper Oil & Gas (RIP – TSX.v)

Position opened: First purchase on October 10 2008, total average cost of $0.134 CAD

Position closed: Last sale on March 08 2011, total average proceeds of $0.120 CAD, plus $0.40CAD dividends ($0.52 CAD)

Hold period: 2.40 years

Rates of return: 89% (simple) and 30.5% (annualized)

Ripper started out as “just another” junior oil and gas investment, but eventually became such a learning experience that I’ve often considered writing up an entire post about it. Regardless, the purchase of Ripper came about because it was a profitable oil & gas producer – which is rarer than it should be. In an industry known for blowing its brains out with cost overruns, Ripper year end (2008) financials provided a glimpse of a company that was earnings positive, was creating $0.14/share in cash flow, and had healthy insider ownership. Eventually, the folks at Ripper decided to orchestrate a full exit from the industry, and issued a press release indicating that they had sold some significant properties, and that because of this, “they may declare a dividend”. That last part was not unlike spotting the Loch Ness monster and the Yeti at Sunday brunch, but because of Rippers size, the market hardly moved the shares. As a result, I bought all the shares I could, and any faith I had in the efficient market theory evaporated. My return on Ripper actually would have been better, as I purchased more shares after the special dividend (which skew the return values), as I thought the future might hold more nice surprises. I was wrong, but despite my misplaced optimism, the special dividend made all the difference. If anything else, Ripper cemented my belief that small companies can be mispriced for significant periods of time, which usually spells opportunity for the small investor.