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Posts tagged ‘pacific ethanol’

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.

 

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

Mar 17

2 Comments

Week 141: Portfolio Allocation

Portfolio Performance

week-141-yoyperformance

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

week-141-Performance

Recent Developments

I’ve been on vacation and so am a couple weeks late getting an update out.

My portfolio had a big move up, thanks mostly to the movement of Pacific Ethanol and MagicJack. Pacific Ethanol had a one day gain of 67% last Thursday, and is nearly a 4-bagger since I bought in. MagicJack is nearly a double.

But what has really helped is that even before the run-up Pacific Ethanol was my largest position. MagicJack was my fourth largest position.

One of the ironies of writing about the stocks I own, is that what I write about most is often not what I have the biggest position in.  The stocks I have the most to say about are the one’s that are on the cusp, where I am constantly debating whether to hold on to them or not.  My biggest positions; Pacific Ethanol, Yellow Media and MagicJack, for example, I have written only a single post about.  That post states the thesis, and as long as that thesis is valid I don’t have much else to say.

Yet the stocks in my portfolio are far from being of equal weighting.   I usually have a lot of stocks. Unless the market is going down, the stocks number at least 30 and has recently approached 40. But most of the positions are quite small, in the 1-2% range.  These as starter positions; enough to keep me interested and following the company, but not enough to hurt me too much. If my thesis for these companies plays out, or if, as I learn more I become more comfortable with the idea, I add.  If not, if the company materially lags or sometimes if time simply passes and I lose interest in the idea, I drop the position and move on. Read more

Dec 30

20 Comments

Pacific Ethanol – Cyclical Turn?

Over the years I have had pretty good luck catching cyclical businesses at the turn of a cycle.  One of my first really successful investment ideas centered around the turn in copper prices in 2003-2004.  I ended up with multi-baggers in Aur Resources and Hudbay Minerals.  I caught the move in metallurgical coal in 2007-2008 and saw similar results from Western Canadian Coal and Grand Cache Coal.  In 2010 I latched on to a turn in the pulp cycle and saw 3-baggers from Tembec and Mercer International.  More recently I took advantage of the turn in trucking with a double from Frozen Food Express and of course YRC Worldwide, where I was able to make 6x my money in about 4 months.

So cyclical businesses can pay off big, but you have to time them right and never forget that they are cyclical businesses; what can seem like very easy come can also be just as easily gone.  Nevertheless, the upside can be quite large, because most of these businesses are low-margin commodities where relatively modest changes in prices can have a large impact on company margins.

A Turn in the Ethanol Business?

I’m still in the middle of looking at Pacific Ethanol so take what I’m writing here with a grain of salt.  There may be elements of the thesis that I am missing.  Nevertheless the idea seems promising and it appears, at least so far, to fit with the theme of a cyclical business on the cusp of a turn. I’m throwing this post out now because the stock is moving quite quickly and I am looking for feedback to fill the holes and solidify the idea for me. Read more