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Posts from the ‘MGP Ingredients (MGPI)’ Category

Week 181 Doing ok but not loving this market

Portfolio Performance

week-181-yoyperformance

week-181-Performance

See the end of the post for the current make up of my portfolio and the last twelve weeks of trades (its been a while since I did a full update).

The last few weeks have been a rollercoaster.  It was less than a week ago, on Tuesday night, that  I was deliberating whether I should be making dramatic cuts to my exposure the next morning.  By the market close Friday my portfolio was back to the post October peak.

The gyrations have not been due to particular volatility in the stocks I own.  Over the last month I have basically been tracking the market, doing a little bit better but not much.  Its just that the market is going up and down like a yo-yo.

While I am happy to have gained back the losses I took over the past couple of weeks, this whole dynamic makes me uneasy.  Too many extremes for my liking.  In my investment account, which is where most of my risk is and the one I track here (its also by far the most fun one to write about) I’ve taken down some exposure over the last few days by reducing some positions that seem to be the most prone to gyrations in this market.  Stocks like Ocwen, Nationstar, Aercap and the like (note that I wrote this over the weekend and had reduced my servicing positions before the Ocwen settlement today.  Today I sold Ocwen entirely at the open, being a little surprised that it was trading at $19+, bought back some Nationstar at a little over $28 later in the day and then bought back a bit of a position in Ocwen at the end of the day on hope of a short term bounce). Read more

Week 177: Perspective

Five weeks ago I wrote that I was walking away for a while.  And so I did that.  It didn’t last as long as I had anticipated.

At the time I had taken my portfolio to about 60% cash and I had a number of shorts that helped hedge out the exposure from my remaining longs.  In early October I had basically stepped away because I had made some mistakes and lost confidence in my decisions.  It had started with the mistake of not looking closely at the oil supply/demand dynamic, which was compounded by the mistake of selling the wrong stuff when the bet began to go wrong.  As I lost money on a few oil and gas holdings, rather than reducing those positions I reduced other positions, presumably with the intent of reducing my overall risk.  Unfortunately this isn’t really what I was doing.  What I was actually doing was selling what was working while holding onto what wasn’t.  A cardinal mistake.

The consequence was that I saw my portfolio dip 12% from its peak by the second week in October.  More frustrating was that as stocks recovered in late October, I watched as some of the names I had sold near their bottom, in particular Air Canada, Aercap, and Overstock, recover their losses and were on their way back up.

I wrote my last post on a Friday afternoon after the market had closed.  Over that weekend I was virtually unencumbered by the markets.  My portfolio was cash, my blog was on hiatus, I had nothing to prevent me from thinking clearly. I don’t remember exactly when the moment came, but at some point that weekend I had a realization.

For those who have followed this blog over the past few years, you will remember that in December of last year I made a very large bet on New Residential.  The stock had gotten hit down to below $6 at the time.  I thought this was rather ridiculous and so I bought the stock.  I bought a lot of the stock.  I made it a 25% position in my portfolio.

In a narrow sense, the trade worked out.  By the end of December the stock had jumped close to $7 and I sold the position for a tidy profit.  But in the broader sense, it was an abject failure. Read more

Week 163: Knowing when you are not at an advantage

Portfolio Performance

week-163-yoyperformance

week-163-Performance

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

Recent Developments

Note that this update is as of Friday, August 15th.  I have been a few days delinquent in getting it out.

I have strayed from my bread my butter of late, away from the tiny micro-caps that pass everyone else by and into the world of still small but not so obscure caps.  These are stocks like Air Canada, AerCap and Bellatrix among others, still far from being large caps, but big enough to receive the attention of analysts and funds.

I am not so sure of my own advantage with these stocks. I may be overstepping my own abilities to think that I can see something here the market is not.  I am under no misconceptions about my research. There is simply no way that I, as an individual investor with a couple of hours of free time every day, can match the depth and scope of the research that the institutions have. Read more

I added MGP Ingredients because their ingredients are primarily corn and wheat

Sometimes you latch on to a good idea but can’t find a stock that fits it.  That’s what happened to me as I scoured through 10-K’s looking for a way to play the fall in corn, wheat and bean prices.

I spent about a week looking and not having much luck.  Fortunately one of my twitter acquaintances came to the rescue, as @17thStrCap introduced me to MGP Ingredients (MGPI).

The Business

MGP Ingredients looks like a very good way to bet on lower grain prices.  The company operates three businesses, all of which stand to benefit from the decline in the grains:

  1. Distillery Products: via plants in Atchison Kansas and Lawrensburg, Indiana, corn, barley and rye are turned into beverage alcohol and industrial food grade alcohol.  The residue from the process is sold as distillers feed.  A small amount of fuel grade alcohol (not ethanol) is also produced
  2. Ingredient Solutions: specialty and commodity wheat starches and wheat proteins are produced from wheat flour
  3. Illinois Corn Processing (ICP): a 30% ownership in an ethanol plant in Pekins Illinois that produces around 90 million gallons of ethanol per year.  SEACOR owns the other 70% of the plant

Read more

Week 161: Earnings so far – Pacific Ethanol and my other ethanol plays

I agreed to this deal with Seeking Alpha where they post my articles from the blog and I don’t have to do anything. Its a pretty fair deal; the reason I never published them before had more to do with me being lazy then anything else. The only downside is that everything I write will get posted and I don’t want everything I write to get posted because much of what I write is blog-worthy but not publishing-worthy.  Sometimes I just want to post my thoughts here, and not have to reference and review every data point to make sure I have all my t’s crossed.  Therefore I created a simple rule whereby if I put the words Week XX in the title of my post they do not get published on Seeking Alpha.  And that is the long winded, paragraphical description of why I continually make the rather banal observation of how many weeks I have been writing this blog  in the title of so many posts.

With that out of the way, lots of earnings reports for companies I own came out this week and I am going to give my thoughts on a few of them.  We will start with the biggest of the bunch, at least in terms of my own P&L: Pacific Ethanol and my other ethanol plays.

Pacific Ethanol

This is a very large position for me and so obviously I was paying close attention to their report on Thursday.  I was a little surprised that the earnings per share number was below a buck.  It turns out that I had missed a couple things.

First, I didn’t realize that the company wasn’t able to utilize their net operating losses (NOLs) in the second quarter and would therefore have to pay tax.  This was mentioned in the Q1 10-Q but I didn’t read through the details carefully enough.  So the company was taxed at 30% and that was a big reason the earnings per share number did not hit the magic $1 mark that I had expected. Read more