We’ve received many inquires from clients about there Quicksilver Resources (KWK) position. Since last Trade Day the symbol changed from KWK to KWKA. It is a result of delisting from normal stock exchanges and moving to the pink sheets due to its low stock price. Unfortunately, this is bad sign for the future prospects of this company. At this time my recommendation is to still hold the shares until an official announcement of bankruptcy or restructuring is announced. The change in value at this point will be minimal compared to the overall loss in value since starting the position.
I understand and feel the same frustrations as you with the KWK position. As I believe you are aware, we have two exit points when we begin a Snider Method position. They are selling the shares for more than what we paid for them or bankruptcy. In the case of bankruptcy, we stick with a position until the end because it is very rare for a stock to reach this scenario. However, it can and will happen with a small percentage of our positions. We hold positions until bankruptcy because we believe a small number of large losses is better than a large number of small losses.
Situations like KWK often create additional nervousness around stocks in similar sectors or have experienced similar declines in value. We limit a portfolio to a maximum of 30% in any sector as well as use the Zeta bankruptcy screen to avoid the worst case. We do our best to limit these positions as well as create the best long-term results. I encourage everyone to stay the course and overcome the recency bias driving us to emotional decisions. While every investment strategy will have its weaknesses, remaining rational, focused, and disciplined in our approach has lead us to a very successful investment strategy over the years. I wish I could be more encouraging and offer more hope for the future of KWK. At this point we are close to the worst case scenario of the Snider Investment Method.
