Traders Playing BAS Are Out Of Their Minds

367 views

Okay, I’ve read the report from BAS and can comfortably say that those who are pressing BAS shares lower are mentally unhinged.

Today – October 24, 2014 – a prospective investor could purchase shares of BAS for about $13.60. BAS just reported earnings of $0.24 a share, up from $0.06 last quarter. At a current book value of just under $7; and even playing coy and considering BAS earnings of $0.15 a quarter from here forward; BAS is priced with a risk threshold of just 11 years.

At the most recent earnings of $0.24, that threshold drops to a theoretical breakeven point of just under 7 years.

BAS is priced perfectly reasonably, and that gets you exposure to a company that grew revenues an additional 10% in the last three months. Year over year, BAS is growing at a more than 20% clip.

BAS hit these numbers without even factoring in additional operation capacity that is being brought online later this year. Consider for example completion and remedial services, where as of September 30, 2014, Basic had roughly 413,000 HHP up from approximately 351,000 HHP at the end of the previous quarter and 292,000 HHP as of September 30, 2013 – that’s a 42% increase in capacity.

But oil prices are going to render that excess capacity worthless, right? Actually I defer to the CEO on this subject:

“We have not seen a reduction of activity by our customers due to the recent decline in oil prices, and none have indicated reductions in their 2015 growth plans. Early indications of these capital spending programs look to be slightly higher than 2014 levels. We will monitor utilization rates closely and should we see any meaningful pullback, we will react quickly as we have historically.”

So to recap; BAS is a company growing at a rate that makes it the envy of the party, which even excluding any additional growth is moderately priced, down 9% today because people are concerned, mind you, that maybe the industry might slow down (of which there is no indication whatsoever that BAS would be hurt disproportionately or even that that is happening).

Let me put this all into perspective for you. You could go out today and buy shares of BAS for the same price that you could get them last year when the company was losing $0.17 per share per quarter. The market is giving BAS no premium whatsoever for going from an unprofitable company, to a profitable one.

Jesus! – (punches a brick wall in his office) I hate it when the market does dumb shit like this!

I have just mentally budgeted an additional 10% of my asset allocation solely for the purchase of BAS shares until such time as I shall be either satisfied, or badly wounded.

Today, my account stands about 95% long. I am willing to take it to 105% on margin exclusively for the acquisition of BAS shares, not counting on any other purchases I might elect to make or future sales.

First buy order comes at $12.

On HCLP and Secondary Offerings In General

186 views

Following the glory of obscene growth potential yesterday – in the form of long term supply agreement amendments being announced – HCLP followed up by declaring a secondary offering. After hours and to the open, the price was off 5%.

I cannot in good conscience sit by and allow this to pass unaddressed. For you see, many of you have a very cliche, knee jerk opinion of companies raising money, which I have commented on before now.

Why is this? What is it about secondary offerings that you hate so much?

Myth One: They’re Dilutive

There is a major opinion in markets, unquestionably, that secondary share offerings inherently ruin the performance for existing shareholders.

The logic goes something like this – ahem – “ABC makes $100,000 per quarter, with 1 million shares outstanding, and I earn $0.10 a share. If they issue another 100,000 shares then I only make $0.091!”

Let’s just quickly break down this scenario and why it’s wrong.

First off, if a company sells shares, they take money onto their balance sheet. Especially right now, where new shares are routinely sold at prices FAR beyond their worth, the new cash on the balance sheet more than overcompensates for the loss of earnings, at least in the short term. If my company is selling stock at 20-30X earnings, it’s sort of a buffer to that dilution fear, isn’t it? Actually, lots of secondary offerings immediately make money for existing shareholders.

I only clearly lose if management is somehow selling stock for less than it’s worth; in which case they will most likely be sued up a tree. If they’re selling it at par, for fair value, then by definition it’s a wash (fair value including some form of discount for future earnings potential).

And then there’s the biggest question: what is management planning on doing with the money? Are they squirreling it away in non-marketable warehouses they plan on building, perhaps somewhere in Antartica? Or are they, like most businesses, trying to grow? And what is the potential of that growth? If opportunities that attract that new money have higher earnings per share than existing net operations, then all prior shares in existence will have benefited from the new equity.

Claim: whether or not a secondary offering is dilutive depends very much on what management is going to do with the money.

Myth Two: Debt Is Always A More Effective Way To Finance A Company

There’s another specious tidbit circling business community colleges. “So you have an opportunity to pursue; equity or bonds? Well offering bonds to finance the job will always have a bigger payoff for shareholders.”

Again, I find this claim to be wanting. The argument is weak from the onset. But please first note what I am not about to argue. I am not arguing that this claim is always false. But it is clearly also not always true.

If I raise money on a project, at best existing shareholders will be able to make a return above both the principle of the notes and the interest you owe on the bonds.

How is this that different from raising new money?

To start, the principle of the bond corresponds to the price per share of the equity raise. Turning these two objects over, we can see that, at least in our present environment, new shares being sold for more than they’re worth, from one perspective secondary offerings have a superior element to them for existing shareholders – existing shareholders can actually make money off the transaction (see above).

If my company issues debt, how have I benefited besides through “future possible earnings”? I cannot make money on the transaction. By nature of issuing a bond, every cent will need to be repaid (or else carry severe implications for myself as a shareholder). I personally have not directly benefited.

If my company issues stock at a big mark up – like they can right now – as a shareholder I have probably made money. New shares in a healthy market add more to the balance sheet than the new money receives in return.

After turning over the principle/equity issue, now let’s look at the dilution. Well, surely dilution corresponds to the interest on the bonds, does it not?

Where do you suppose interest gets paid? From the Ether? It comes directly from existing operations. If you’re lucky, the new/expanded business venture management is pursuing earns enough to offset both the principle of the bond and the interest and you, as a shareholder, make money on top. Otherwise, it’s a drag on earnings and…you guessed it – dilutive.

Now it could be parsed over here that debt’s return is finitely, contractually limited, so if a company raises debt to finance a project and that project has a fat payoff, then equity will always get more than in the alternative world where the project was financed through a secondary.

While this is technically true when peered at through the very narrow lens of a profitable, big payoff growth story, it overlooks two important points of view. The first is that 1) the game changes completely if a project does not make money, in which case the equity raise if vastly superior to the debt issuance (since the new equity will have diluted the loss for existing shareholders) whereas the debt, being a higher claim than stock, will compound the losses. The second being 2) a company can always just raise debt after a secondary (or vise versa) – and frequently many of the impacts of either a secondary or a debt issuance can be reversed or even transformed in the other direction (market prices permitting).

Claim: whether or not debt is superior to secondary offerings depends very much on a case by case basis for a company. Current debt levels, the possible payoff of the business growth, downside risks, interest rates, and market premiums for secondary must all be carefully considered. This business rule of thumb is overly simplistic.

Beware Billionaires Pushing Leverage

I couldn’t just let this stand unchallenged. Sometimes debt is the answer, but other times it’s best to just issue some more equity. It isn’t fair to turn the choice into a bumper sticker that management has to adamantly follow.

And so often, raising debt is exactly the wrong answer.

Some of the biggest pushers of corporate debt are so often big activist shareholders with goals ill-aligned with the regular mom and pop retirement accounts; people looking for a quick buck and possessing dubious intentions. Guys like Dan Gilbert in Detroit who are just too happy to fuck over an entire company of hardworking employee shareholders in a start up tech advertising company, then leave them holding nothing (and subsequently being supported by Michigan’s Supreme Court…cough cough). (For the record, that had nothing to do with debt, I just felt like spelling out what a piece of shit Dan Gilbert is).

It’s a long standing favorite of activist shareholders to take a big position in a lackluster company with low leverage, then pressure them to take on as much debt as possible, fling it around on the balance sheet to beat some poorly defined analyst metrics and make an illusion of growth, spice it up into a popular position, then unload the company for a fast gain on multiples expansion.

The only way it gets better for the hedge fund guys is if they can pay out as much of that leverage to themselves, either in special dividends, or – better – by bullying management into buying their private assets at a premium (you don’t have to share with anyone else that way).

At the end of the road, you have a lackluster and profitable company transformed into a glitzy and unprofitable one. That isn’t growing a business; it’s liquidating one.

It’s all fun and glam right now, with interest rates so low. However, as debt needs to get turned over next decade, we’ll get to see who was actually working for their company versus who was trying to rob it.

It All Comes Down To Trust And Timing

Do you trust your management, or don’t you? Secondary offerings and debt issuance can both go bad if the mood is right. What is the money being used for and what are the risks?

Is the company pulling a lot of strange moves on their filings? Are the cash flows pages telling the story of a company that isn’t actually taking in more cash, despite a great “growth” story? Are classes of shares being thrown around like a bowl of alphabet soup?

And what are prospects of the business looking like? Is demand for products growing? Does the company have more business than they can possibly service? At the end of the day, this is likely to be the biggest factor in the success or failure of any business. Debt versus secondary offering will probably play a backseat, if management is working as a proper fiduciary in a hot business cycle.

Update: I purchased more shares of HCLP for $62.47

This Market Is A Real Bummer

80 views

One of my newest positions, ETP, co-reported earnings (alongside ETE, a familial body) that rose 50% year over year, soundly crushing estimates. The partnership is putting out almost 7% in distributions annually and distributable cash flow lifted 11%.

The partnership is modestly priced and more than a fair buy here. The only conceivable issue in the report I saw was that they’re paying out a little more in distributions than they take it, at the moment (and not for long if this kind of growth keeps up). And a little over a month ago ETP announced plans to build a new pipeline from the figurative gold mines in the Bakken region in North Dakota to their existing distribution network in Illinois…and the new capacity is allegedly already filled.

So following what can only be described as a stunning performance, the market is roundly bidding up units of ETP, correct?

WRONG

ETP has given back all the morning ramp following the exciting earnings beat, and ETP is now struggling to hold just half a percent gain on the day.

That’s just the kind of market we have right now. You can hear the oxygen rushing out of the trading floor. I have a couple similar positions that have all left analyst estimates in the dust (mostly after having already been revised higher), and yet they just can’t catch a bid.

My 1,001st Post – It’s About BAS

200 views

To think the post before this one was my 1,000th since joining the site. I would have had more fanfare if I had realized. But then the best tribute I can make is to march onward with the good work.

BAS reported earnings last night of $0.06 a share – $0.13 excluding one time items. So far this morning, BAS is gapping down 10% (and counting).

This is honestly a pretty good showing. They lost $0.10 a share last quarter, so they swung $0.23 cents into profits.

The company has grown revenues 12% from this time last year. Revenues are 8.5% higher from last quarter.

At the moment, the CEO is anticipating another 4-6% lift in revenues in the third quarter. That should be good for another $3-4 million in profits for shareholders, so I’d expect earnings to lift another $0.20 or so at the next report. That would put us at ~$1.30 annually with a full quarter left to go in 2014.

Beyond that, I see more shareholder value being unlocked as the cost of capital continues to come down and natural gas adoption progresses.

The stock is cratering this morning on profit taking (it’s priced pretty fairly right now, in line with the rest of the market), but I’d guess it recovers soon enough. We’re on track to make that $1.60 annually I mentioned, and the $2.50-3.00 surprise I also hoped for is not out of the question. Barring some sort of major stumble, the stock should be in the vicinity of $35 by Christmas.

After all, if they keep this tempo, they’re at $2.00 yearly earnings by the start of 2015.

Bought Back More HCLP for $59.39

176 views

Over the past week or so, I raised cash to 25%. This was good fortune, as HCLP, my mantelpiece position, has dropped 8% since I let up.

Today, I repurchased half of those shares, which I sold at $64.19 each, for $59.39.

It seems like good enough of a bet to me. HCLP is growing so fast… it’s trading at just over 17x Q3 2014 earnings estimates. I have no good way to guess what HCLP’s earning’s potential is over time; but 17x doesn’t seem unreasonable, particularly with a steady announcement of 5 year supply agreements being announced and 200% revenue growth last year. When you’ve managed to get in on the ground floor of such a high flying position, it just makes sense to hold long a core stake, and ride the waves.

This 8% drop is just another opportunity to make extra money, until such time as that logic is challenged. For the moment, HCLP just managed to touch its 20 day moving average for the first time since early June.

Next earnings announcement is in August. So tell me, who wants to stand in the way of this thing?

BAS Just Saved My Day

108 views

If not for Basic Energy Services turning on a dime and sprinting away from the rest of the trash that comprises this trading session, I would be having a pretty bad day.

UEC is down over 50% since I bought it. Mind you, as I have stated repeatedly, it is a small position. At its peak, it was under 5% of my account. So I’m not panicked here. But damn it, that was my 5%.

Give me my money back.

The trouble with the uranium miners (and the reason I’ve been very adamant up until now to just keep it simple and avoid the smaller businesses) is pretty forwardly summed up in UEC’s latest filing. They sold $0.00 in revenue in the first three months of 2014.

That’s $0.00.

The 2014 YEAR OF URANIUM BLISS (or whatever the hell I called it) …has been cancelled. Uranium spot just nosedived this week and, even though I suspect this flash crash is nearer the end of the turmoil, that kind of godless price action can only portend one thing.

Somebody is about to get liquidated.

I just pray it isn’t UEC.

CCJ is treading water daily. It’s all she can do to hold the line, but one false move and it’s a quick list to the side and down she goes.

The rest of my positions are holding up fairly well, actually. The multifamily theme remains tantalizing, particularly now that the primary argument against them – a resurgence in homeownership rates and a drop in occupancy for rentals – is such obvious bunk. AEC and MAA should continue to perform.

NRP has held up decent enough, following the 25% washout it took this year. That’s probably been my worst idea so far in 2014. But they are getting things under control, I have a hunch coal may be a terrific investment here, and I get to collect 8% annually while I wait.

I’m definitely not +10% for the year anymore, but there’s another 8 months to make something happen yet. My fear isn’t my positions, it’s what consequence an entire index of investors getting their combined comeuppance will have on me.

The NASDAQ traders got stupid. Real stupid. Will that spill over to me? It’s looking likely.

Like it or not, the stock market tends to take on a real flare of the vineyard effect. You pop up five vineyards next to each other, they all do well. Plenty of room to visit each, for the patrons. In fact, it draws in more business.

But if one of those bastards let’s an infestation go unattended; suddenly you have nothing but tears and reek wine.

Tesla earnings are out after the bell. Let’s see what happens there.

Traders Playing BAS Are Out Of Their Minds

367 views

Okay, I’ve read the report from BAS and can comfortably say that those who are pressing BAS shares lower are mentally unhinged.

Today – October 24, 2014 – a prospective investor could purchase shares of BAS for about $13.60. BAS just reported earnings of $0.24 a share, up from $0.06 last quarter. At a current book value of just under $7; and even playing coy and considering BAS earnings of $0.15 a quarter from here forward; BAS is priced with a risk threshold of just 11 years.

At the most recent earnings of $0.24, that threshold drops to a theoretical breakeven point of just under 7 years.

BAS is priced perfectly reasonably, and that gets you exposure to a company that grew revenues an additional 10% in the last three months. Year over year, BAS is growing at a more than 20% clip.

BAS hit these numbers without even factoring in additional operation capacity that is being brought online later this year. Consider for example completion and remedial services, where as of September 30, 2014, Basic had roughly 413,000 HHP up from approximately 351,000 HHP at the end of the previous quarter and 292,000 HHP as of September 30, 2013 – that’s a 42% increase in capacity.

But oil prices are going to render that excess capacity worthless, right? Actually I defer to the CEO on this subject:

“We have not seen a reduction of activity by our customers due to the recent decline in oil prices, and none have indicated reductions in their 2015 growth plans. Early indications of these capital spending programs look to be slightly higher than 2014 levels. We will monitor utilization rates closely and should we see any meaningful pullback, we will react quickly as we have historically.”

So to recap; BAS is a company growing at a rate that makes it the envy of the party, which even excluding any additional growth is moderately priced, down 9% today because people are concerned, mind you, that maybe the industry might slow down (of which there is no indication whatsoever that BAS would be hurt disproportionately or even that that is happening).

Let me put this all into perspective for you. You could go out today and buy shares of BAS for the same price that you could get them last year when the company was losing $0.17 per share per quarter. The market is giving BAS no premium whatsoever for going from an unprofitable company, to a profitable one.

Jesus! – (punches a brick wall in his office) I hate it when the market does dumb shit like this!

I have just mentally budgeted an additional 10% of my asset allocation solely for the purchase of BAS shares until such time as I shall be either satisfied, or badly wounded.

Today, my account stands about 95% long. I am willing to take it to 105% on margin exclusively for the acquisition of BAS shares, not counting on any other purchases I might elect to make or future sales.

First buy order comes at $12.

On HCLP and Secondary Offerings In General

186 views

Following the glory of obscene growth potential yesterday – in the form of long term supply agreement amendments being announced – HCLP followed up by declaring a secondary offering. After hours and to the open, the price was off 5%.

I cannot in good conscience sit by and allow this to pass unaddressed. For you see, many of you have a very cliche, knee jerk opinion of companies raising money, which I have commented on before now.

Why is this? What is it about secondary offerings that you hate so much?

Myth One: They’re Dilutive

There is a major opinion in markets, unquestionably, that secondary share offerings inherently ruin the performance for existing shareholders.

The logic goes something like this – ahem – “ABC makes $100,000 per quarter, with 1 million shares outstanding, and I earn $0.10 a share. If they issue another 100,000 shares then I only make $0.091!”

Let’s just quickly break down this scenario and why it’s wrong.

First off, if a company sells shares, they take money onto their balance sheet. Especially right now, where new shares are routinely sold at prices FAR beyond their worth, the new cash on the balance sheet more than overcompensates for the loss of earnings, at least in the short term. If my company is selling stock at 20-30X earnings, it’s sort of a buffer to that dilution fear, isn’t it? Actually, lots of secondary offerings immediately make money for existing shareholders.

I only clearly lose if management is somehow selling stock for less than it’s worth; in which case they will most likely be sued up a tree. If they’re selling it at par, for fair value, then by definition it’s a wash (fair value including some form of discount for future earnings potential).

And then there’s the biggest question: what is management planning on doing with the money? Are they squirreling it away in non-marketable warehouses they plan on building, perhaps somewhere in Antartica? Or are they, like most businesses, trying to grow? And what is the potential of that growth? If opportunities that attract that new money have higher earnings per share than existing net operations, then all prior shares in existence will have benefited from the new equity.

Claim: whether or not a secondary offering is dilutive depends very much on what management is going to do with the money.

Myth Two: Debt Is Always A More Effective Way To Finance A Company

There’s another specious tidbit circling business community colleges. “So you have an opportunity to pursue; equity or bonds? Well offering bonds to finance the job will always have a bigger payoff for shareholders.”

Again, I find this claim to be wanting. The argument is weak from the onset. But please first note what I am not about to argue. I am not arguing that this claim is always false. But it is clearly also not always true.

If I raise money on a project, at best existing shareholders will be able to make a return above both the principle of the notes and the interest you owe on the bonds.

How is this that different from raising new money?

To start, the principle of the bond corresponds to the price per share of the equity raise. Turning these two objects over, we can see that, at least in our present environment, new shares being sold for more than they’re worth, from one perspective secondary offerings have a superior element to them for existing shareholders – existing shareholders can actually make money off the transaction (see above).

If my company issues debt, how have I benefited besides through “future possible earnings”? I cannot make money on the transaction. By nature of issuing a bond, every cent will need to be repaid (or else carry severe implications for myself as a shareholder). I personally have not directly benefited.

If my company issues stock at a big mark up – like they can right now – as a shareholder I have probably made money. New shares in a healthy market add more to the balance sheet than the new money receives in return.

After turning over the principle/equity issue, now let’s look at the dilution. Well, surely dilution corresponds to the interest on the bonds, does it not?

Where do you suppose interest gets paid? From the Ether? It comes directly from existing operations. If you’re lucky, the new/expanded business venture management is pursuing earns enough to offset both the principle of the bond and the interest and you, as a shareholder, make money on top. Otherwise, it’s a drag on earnings and…you guessed it – dilutive.

Now it could be parsed over here that debt’s return is finitely, contractually limited, so if a company raises debt to finance a project and that project has a fat payoff, then equity will always get more than in the alternative world where the project was financed through a secondary.

While this is technically true when peered at through the very narrow lens of a profitable, big payoff growth story, it overlooks two important points of view. The first is that 1) the game changes completely if a project does not make money, in which case the equity raise if vastly superior to the debt issuance (since the new equity will have diluted the loss for existing shareholders) whereas the debt, being a higher claim than stock, will compound the losses. The second being 2) a company can always just raise debt after a secondary (or vise versa) – and frequently many of the impacts of either a secondary or a debt issuance can be reversed or even transformed in the other direction (market prices permitting).

Claim: whether or not debt is superior to secondary offerings depends very much on a case by case basis for a company. Current debt levels, the possible payoff of the business growth, downside risks, interest rates, and market premiums for secondary must all be carefully considered. This business rule of thumb is overly simplistic.

Beware Billionaires Pushing Leverage

I couldn’t just let this stand unchallenged. Sometimes debt is the answer, but other times it’s best to just issue some more equity. It isn’t fair to turn the choice into a bumper sticker that management has to adamantly follow.

And so often, raising debt is exactly the wrong answer.

Some of the biggest pushers of corporate debt are so often big activist shareholders with goals ill-aligned with the regular mom and pop retirement accounts; people looking for a quick buck and possessing dubious intentions. Guys like Dan Gilbert in Detroit who are just too happy to fuck over an entire company of hardworking employee shareholders in a start up tech advertising company, then leave them holding nothing (and subsequently being supported by Michigan’s Supreme Court…cough cough). (For the record, that had nothing to do with debt, I just felt like spelling out what a piece of shit Dan Gilbert is).

It’s a long standing favorite of activist shareholders to take a big position in a lackluster company with low leverage, then pressure them to take on as much debt as possible, fling it around on the balance sheet to beat some poorly defined analyst metrics and make an illusion of growth, spice it up into a popular position, then unload the company for a fast gain on multiples expansion.

The only way it gets better for the hedge fund guys is if they can pay out as much of that leverage to themselves, either in special dividends, or – better – by bullying management into buying their private assets at a premium (you don’t have to share with anyone else that way).

At the end of the road, you have a lackluster and profitable company transformed into a glitzy and unprofitable one. That isn’t growing a business; it’s liquidating one.

It’s all fun and glam right now, with interest rates so low. However, as debt needs to get turned over next decade, we’ll get to see who was actually working for their company versus who was trying to rob it.

It All Comes Down To Trust And Timing

Do you trust your management, or don’t you? Secondary offerings and debt issuance can both go bad if the mood is right. What is the money being used for and what are the risks?

Is the company pulling a lot of strange moves on their filings? Are the cash flows pages telling the story of a company that isn’t actually taking in more cash, despite a great “growth” story? Are classes of shares being thrown around like a bowl of alphabet soup?

And what are prospects of the business looking like? Is demand for products growing? Does the company have more business than they can possibly service? At the end of the day, this is likely to be the biggest factor in the success or failure of any business. Debt versus secondary offering will probably play a backseat, if management is working as a proper fiduciary in a hot business cycle.

Update: I purchased more shares of HCLP for $62.47

This Market Is A Real Bummer

80 views

One of my newest positions, ETP, co-reported earnings (alongside ETE, a familial body) that rose 50% year over year, soundly crushing estimates. The partnership is putting out almost 7% in distributions annually and distributable cash flow lifted 11%.

The partnership is modestly priced and more than a fair buy here. The only conceivable issue in the report I saw was that they’re paying out a little more in distributions than they take it, at the moment (and not for long if this kind of growth keeps up). And a little over a month ago ETP announced plans to build a new pipeline from the figurative gold mines in the Bakken region in North Dakota to their existing distribution network in Illinois…and the new capacity is allegedly already filled.

So following what can only be described as a stunning performance, the market is roundly bidding up units of ETP, correct?

WRONG

ETP has given back all the morning ramp following the exciting earnings beat, and ETP is now struggling to hold just half a percent gain on the day.

That’s just the kind of market we have right now. You can hear the oxygen rushing out of the trading floor. I have a couple similar positions that have all left analyst estimates in the dust (mostly after having already been revised higher), and yet they just can’t catch a bid.

My 1,001st Post – It’s About BAS

200 views

To think the post before this one was my 1,000th since joining the site. I would have had more fanfare if I had realized. But then the best tribute I can make is to march onward with the good work.

BAS reported earnings last night of $0.06 a share – $0.13 excluding one time items. So far this morning, BAS is gapping down 10% (and counting).

This is honestly a pretty good showing. They lost $0.10 a share last quarter, so they swung $0.23 cents into profits.

The company has grown revenues 12% from this time last year. Revenues are 8.5% higher from last quarter.

At the moment, the CEO is anticipating another 4-6% lift in revenues in the third quarter. That should be good for another $3-4 million in profits for shareholders, so I’d expect earnings to lift another $0.20 or so at the next report. That would put us at ~$1.30 annually with a full quarter left to go in 2014.

Beyond that, I see more shareholder value being unlocked as the cost of capital continues to come down and natural gas adoption progresses.

The stock is cratering this morning on profit taking (it’s priced pretty fairly right now, in line with the rest of the market), but I’d guess it recovers soon enough. We’re on track to make that $1.60 annually I mentioned, and the $2.50-3.00 surprise I also hoped for is not out of the question. Barring some sort of major stumble, the stock should be in the vicinity of $35 by Christmas.

After all, if they keep this tempo, they’re at $2.00 yearly earnings by the start of 2015.

Bought Back More HCLP for $59.39

176 views

Over the past week or so, I raised cash to 25%. This was good fortune, as HCLP, my mantelpiece position, has dropped 8% since I let up.

Today, I repurchased half of those shares, which I sold at $64.19 each, for $59.39.

It seems like good enough of a bet to me. HCLP is growing so fast… it’s trading at just over 17x Q3 2014 earnings estimates. I have no good way to guess what HCLP’s earning’s potential is over time; but 17x doesn’t seem unreasonable, particularly with a steady announcement of 5 year supply agreements being announced and 200% revenue growth last year. When you’ve managed to get in on the ground floor of such a high flying position, it just makes sense to hold long a core stake, and ride the waves.

This 8% drop is just another opportunity to make extra money, until such time as that logic is challenged. For the moment, HCLP just managed to touch its 20 day moving average for the first time since early June.

Next earnings announcement is in August. So tell me, who wants to stand in the way of this thing?

BAS Just Saved My Day

108 views

If not for Basic Energy Services turning on a dime and sprinting away from the rest of the trash that comprises this trading session, I would be having a pretty bad day.

UEC is down over 50% since I bought it. Mind you, as I have stated repeatedly, it is a small position. At its peak, it was under 5% of my account. So I’m not panicked here. But damn it, that was my 5%.

Give me my money back.

The trouble with the uranium miners (and the reason I’ve been very adamant up until now to just keep it simple and avoid the smaller businesses) is pretty forwardly summed up in UEC’s latest filing. They sold $0.00 in revenue in the first three months of 2014.

That’s $0.00.

The 2014 YEAR OF URANIUM BLISS (or whatever the hell I called it) …has been cancelled. Uranium spot just nosedived this week and, even though I suspect this flash crash is nearer the end of the turmoil, that kind of godless price action can only portend one thing.

Somebody is about to get liquidated.

I just pray it isn’t UEC.

CCJ is treading water daily. It’s all she can do to hold the line, but one false move and it’s a quick list to the side and down she goes.

The rest of my positions are holding up fairly well, actually. The multifamily theme remains tantalizing, particularly now that the primary argument against them – a resurgence in homeownership rates and a drop in occupancy for rentals – is such obvious bunk. AEC and MAA should continue to perform.

NRP has held up decent enough, following the 25% washout it took this year. That’s probably been my worst idea so far in 2014. But they are getting things under control, I have a hunch coal may be a terrific investment here, and I get to collect 8% annually while I wait.

I’m definitely not +10% for the year anymore, but there’s another 8 months to make something happen yet. My fear isn’t my positions, it’s what consequence an entire index of investors getting their combined comeuppance will have on me.

The NASDAQ traders got stupid. Real stupid. Will that spill over to me? It’s looking likely.

Like it or not, the stock market tends to take on a real flare of the vineyard effect. You pop up five vineyards next to each other, they all do well. Plenty of room to visit each, for the patrons. In fact, it draws in more business.

But if one of those bastards let’s an infestation go unattended; suddenly you have nothing but tears and reek wine.

Tesla earnings are out after the bell. Let’s see what happens there.

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