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Apr 6

What to do with Pacific Ethanol

Being invested in Pacific Ethanol (PEIX) is like riding a yo-yo. Up and down, up and down. It can get a bit nauseating.

As I tweeted earlier this week, I got tired of the motion sickness and reduced my position in Pacific Ethanol considerably.

I dont love this higher ethanol / higher corn prices dynamic. High margins but not sustainable. Rather see low corn, lower ethanol

— L.Sigurd (@LSigurd) April 1, 2014

Halfed my $PEIX position today. Reasons I described earlier. Been great idea for me, 3+ bagger off of avg cost since mid-Dec.

— L.Sigurd (@LSigurd) April 1, 2014

Since that time I’ve sold a bit more and it’s now about 25% of my original position. It’s still a reasonable size but its not going to hurt me (I will remind you that as of my last portfolio update, when Pacific Ethanol was at about $14, the stock was a 16% position for me. That number jumped closed to 20% as the stock rose, but now sits at about 4% with my sales last week and the current price).

As the tweet explains, I didn’t like that the stock was going up because of rising ethanol prices while at the same time corn prices were creeping higher. This wasn’t the dynamic I had invested upon. I wanted sustainable ethanol prices and low corn prices. Ethanol can’t trade at nearly a dollar above RBOB gasoline and you saw that on Wednesday when the weekly EIA statistics showed imports of ethanol. The market was suitably spooked and the price of ethanol has since tanked. More on the ethanol price dynamic in a minute, but first let’s talk about Pacific Ethanol. Read more

Apr 5

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Lojack (LOJN) – Speculating on a step-change from Fleet

I’ve been watching Lojack (LOJN) for a while, almost bought into it a couple of times but I’ve never been able to get comfortable until a few weeks ago.

The irony is that if I had waited a bit longer, I could have gotten in at about 15% less. Oh well. I always dislike writing up a stock that has already moved to the upside (I am in the process of doing just that with Air Canada right now). So here I get to do the opposite; tell you why I liked the stock at $6.20, and must really like it here at $5.40.

Why I bought Lojack in the $6’s

I decided to take a position after I reviewed the fourth quarter results. My reasons were:

The existing stolen vehicle recovery business appears to have reached an inflection where further increases in revenues should make a larger contribution to the bottom line
The outlook the company provided on Fleet was very positive
The stock price (around $6 at the time) priced in a modest improvement in the stolen vehicle recovery business but none of the upside of Fleet.