Reduced Size Of BAS Position To 15% Of Assets

I made a large series of sales in BAS for $26.23 on average. These shares were sold for an average gain of 116% from my initial purchase price a few years ago.

This sale brings BAS back in line to a 15% position in my portfolio. It had been almost 25%. The 10% cash raise will sit on my books for now.

I ran some numbers, and from their last report, I’m thinking BAS was probably worth about $8 a share. This massive move higher has been from the company managing to stop the losses they were taking every quarter. However, the next major risk to the shares will be execution; can the company turn a profit?

I think I can see how the company could make $1.60 a year in earnings pretty easily. That puts an 11 year break even point, which is about the top end of my acceptable range. At this junction, the shares are a fair price, in my book.

But I love the company, so I’ll be keeping the 15% position I have in them. I think they don’t just turn $1.60. I think they surprise us all and make $2.50-3 per share annually, sending the shares into the $30-40 range.

I cannot justify keeping the massive ~25% of my portfolio in BAS though. That’s too much, and I do have a lot of money sitting on the table here. I’m only willing to take regular risks that Basic Energy Services makes the next step successfully, even though I’m confident they will.

This sudden resurge of equities has propelled me back to all time highs; and nothing is “surgier” than Hi-Crush Partners LP (HCLP).

Last night, they announced an amended supply agreement with Halliburton (HAL), for the usual terms – more committed volumes, higher prices, certain benchmarks for yet greater volumes at even higher prices still…etcetera etcetera.

This follows an announcement on the 17th of June for much the same deal with Liberty Oilfield Services.

The culmination of these announcements has sent HCLP to $58.50, at time of this correspondence, gracefully and effortlessly taking out new all time highs of its own.

For the year, I have only one bad investment, and that is NRP. At least, for now. Aside from that, it has been all gravy trains and cocaine buffets.

Up next on the menu: the EPA announcement of new power plant regulations will be recognized as the exact floor for coal stocks.

Get some while the getting is good.

HCLP is taking me higher again; my largest position running another 5% today towards $57 a share.

This puts my gains on this positions closing in on 140% since I bought it last August.

Listen: I need you to stop asking me when I’m going to sell. It’s not just a matter of annoyance – you’re sowing doubt in my subconscious. Trust me, I will let you know when I’m going to sell out. It will become apparent… by my selling out.

To be honest with you, there is a very large part of my spirit that demands I sell and “lock in these awesome gains this instant, Cain Thaler.”

With locking in these gains comes tax obligations. That’s about the best of it. And if there is one thing that has become clear to me, looking back at the trail I paved behind, it is that I exit winning positions much too soon. I still make a good profit on them, mind you. But the message of RGR, AWK, ASR, PM, …a half dozen others – is that I am mentally predisposed to take a quick 20-40% gain and walk away, even when my idea is worth far more.

And so I am locked in an epic battle of self restraint. My opponent is a most worthy foe; my emotional self. We are near equally matched, but I have one singular advantage over this knave. I am much smarter than he.

Or at least, I should be, if I take the time to focus and work against him. That is hard enough without tripping on stray rocks being strewn under my feet by the populace.

If you fear of losing your HCLP wins, then take them. Do so silently, and to yourself. Actually, leave a triumphant decree in my comments to let the world know your pleasure with my services. But talk of my selling, no more.

I think the other contributors on this site are dead on about a new move in the precious metals, so I have my lotto ticket selected. I bought SLW for $24.90.

SLW has managed to keep revenues flat from 2011 to 2013; think about that. Gold and silver were cut down (silver lost more than 50% from the highs). But SLW held revenues flat.

How did they accomplish this? Well, part of it was probably that they weren’t getting the top dollar for their production anyway (either holding out for higher spot or held down by existing futures contracts). But an equally big attribute has been the unwavering stream of acquisitions they’ve been from 2011-2013.

They’ve been offsetting their own loss of revenues by buying out competitors.

That has put them in a curious position of being a very strong play on a rebound in silver and gold. In spite of that, when I look at their cash flows and financial position, they don’t look distressed (if you believe their filing, it’s foreign).

Personally, I don’t completely renounce my common sense here, and I’ll be on the look out for signs of trouble (for instance, creative accounting and instruments of financial destruction buttressing up their book).

But at the moment, taking a new position at these levels feels right enough. They pass the first smell test.

I offset the purchase will sales of HCLP and BAS.

No before you ask, I do not think HCLP or BAS are to be sold here, I just have way too much in them after they doubled this year. It made sense, while taking this new position, to use them to offset the purchase. My other positions were driven below 10%. I need to rebalance soon but want to wait to see if BAS and HCLP can break out further before I do too much.

I added to BTU for $16.80. This is just a small addition; a couple of percent of my net worth.

This play on coal is to be edged into incrementally. There is no hurry.

I offset the purchase with a minor sale of HCLP, which has become outlandishly sized. It is near unanimously disproportionate to the rest of my holdings – I presently have more in HCLP than CCJ – which is astounding when you consider that CCJ has priced pretty steady to where I’ve held it, and it was once more than 20% of my portfolio.

HCLP makes up 26% of my holdings after today’s sale. I may pare back BAS and HCLP some more, just to get them back in line a little. I’ll think about it over the weekend.

The purpose of this post is pure gloating, so if you’re not into that kind of thing, you can step out the door.

I purchased HCLP in the middle of last August for $24.00 a unit. In 10 months, they’ve appreciated 130%, which doesn’t bother factoring in the almost 9% on my original $24.00 price tag they’re paying me this year on the side, in distributions (yields only 4% to you if you buy in now).

There were some opportunistic trades in there for profit also, but who’s counting…?

Now you just remember who the victor is in this game of “Cain Versus The Analysts” going forward.