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Week 168: Cutting my gains

Portfolio Performance

week-168-Performance

 

See the end of the post for the current make up of my portfolio and the last four weeks of trades.

Recent Developments

I don’t know if the chart of performance really does justice to the volatility my portfolio has had over the last couple of weeks.  It feels like much more of a roller coaster than that little blip in the trend that you see on the screen.

I sold out of the rest of Pacific Ethanol and Rex American Resources in the first half of this week.  I hemmed and hawed through the weekend, even briefly added to my position to Pacific Ethanol on Monday (at the same time I was reducing my position in Rex American), but the volatility of the stocks, the declining price of ethanol, and specific to Pacific Ethanol, my uncertainty with respect to their corn basis (I concluded tentatively it is actually quite a bit higher than Q2) led me to capitulate on many of my shares on Tuesday.  I followed that up by selling the rest on Wednesday in the minutes that followed a very bearish EIA inventory report (+800,000bbl!). I tweeted on my sales at the time.

My caution turned out to be fortuitous as the stocks continued to fall the rest of the week.  I was even able to catch a few dollars of profit on the way down; always remembering the old classic to which this blog takes its namesake, I took the lesson that if a stock is to be sold it is likely just as well sold short, and so I took a small short position in Rex American and a few $18 puts on Pacific Ethanol.  The puts were sold Friday and my short position has been cut more than in half, so these were merely short term trades taking advantage of a clearly bearish dynamic. Read more

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Adventures in Ethanol

Over the last week I have played some parts of the ethanol yo-yo well and other parts not so well. Let me review.

On the well side, I significantly reduced my extremely over-sized position in Pacific Ethanol (25% of my portfolio at its peak) at prices of about $23 per share.  On the not-so-well side, I added/subtracted and then added back my position in Rex Energy on continuously declining prices and held on to a still not insignificant percentage of Pacific Ethanol (about 5% position) through the declines of Thursday and Friday.  What is yest to be determine is that I added back some of Pacific Ethanol at $20.15 on Thursday. While I sold half of that on Friday morning for a bit of a profit, I held the other half through the decline on Friday and now sit with those shares at a lower price than I had purchased them for.

How this all ends remains to be seen.  This blog is not intended to be an account of my infallibility. Unlike many others on the blogosphere and on twitter, I have no omniscient insight into what can be absolutely stated as a good or bad decision.  Thus it is that you rarely see me laying out the ridicule, condescension or my favorite, the passive-aggressive rhetoric, that seems to be so prevalent in these mediums.  I can only wish for such certitude.  Unfortunately my world is far too gray to not feel empathetic for those who hold a different opinion than mine.

The beauty and horror of the ethanol stock is that it only takes a small difference of opinion to lead to a drastically different conclusion.  To take an example that I tweeted earlier tonight, in my model I get a $1 quarterly earning swing by adjusting the ethanol price by 20 cents – from $2.05 to $1.85 per gallon (note I originally had written 80c but I hadn’t been making an apples to apples comparison in my model).  A similar point could be made about Pacific Ethanol.  The significance of course is that 20 cents is about the swing that ethanol prices took in the last week. Read more