Hedge Fund Billionaire George Soros Just Sold Oil-Related Stocks: Should You Too?

Billionaire George Soros, a legendary hedge fund manager, earned his fortune in the financial markets. Although Soros is no longer personally involved with investing, his family office, which invests his own money now, is working with more than US$30 billion in capital.

Recently, Soros’ family office had started reducing its exposure to the oil and gas market by cutting down its stakes in a few energy-related companies.

This comes after a collapse in the price of oil from more than US$100 per barrel in the middle of 2014 to less than US$50 per barrel today. Many oil & gas-related companies have been hit as a result and in Singapore, some major companies in the space, like Keppel Corporation Limited (SGX: BN4), Sembcorp Marine Ltd (SGX: S51), and Ezion (SGX: 5ME), have also suffered.

Company Share price change since 17 August 2014
Keppel -33.5%
Sembcorp Marine -35.0%
Ezion -61.7%

Source: S&P Capital IQ

If you own any of the trio – or any oil & gas stocks for the matter – how should you be responding to Soros’ latest moves with oil stocks?

That’s a tough question to answer. But, one way to help us make better decisions is to make sure we avoid the psychological bias of loss aversion.

Simply put, loss aversion is the quirk in our wetware that causes us to feel more pain with a loss as compared to the pleasure we’d feel if we were to gain something of equal value.

If we had invested in Keppel at S$10.94 on 17 August 2014, loss aversion may prevent us from crystallising a loss now even if selling may be the right decision to do so.

So, we should be asking ourselves: Will Keppel be a company I’m willing to buy at the current price of S$7.27? Even if we had really invested in Keppel at S$10.94, that’s simply irrelevant information now. The market has no memory of you buying the share at S$10.94 and does not care if you’re sitting on a loss.

Foolish Summary

If you have oil & gas-related investments that had been bought in the past, ask yourself if you’d feel comfortable investing into them currently and whether you think the investments are undervalued.

If you feel that your investments look cheap, then you should be holding on to them. But if you feel that the risks are too great for you to bear, it might be better to sell even if you’re sitting on a loss which will feel very painful to crystallise psychologically.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns Keppel Corporation.