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
Reminiscences of a Stockblogger 