BAS – This Is What It’s All About

BAS is now up 12% on the day. I share my elation with each and every one of you.

This is what makes it all worth while. The 9th floor will be serving up fresh baked apple pie tonight with hand ground cinnamon, to celebrate (INVITATION ONLY).

I upped my MAA stake for $61.39. The company is selling off here, but I don’t quite understand why. It’s not even worth reflecting on the earnings – they were in line expectations (on the high end). The company’s books don’t even get interesting until the end of next quarter, when the CLP merger gets reflected.

My position was rolled over from CLP at a nice premium. But I’m sticking around – I like the new combined company and want to see where this goes.

In other news, BAS is up over 7% this morning, reversing from mid correction on nothing but the breeze. HCLP is doing well also, up 2%. It looks like the energy sector correction may be about over.

Tesla just had their third car fire in a 6 week period. The data isn’t really volumous enough to tell yet, and so it could just be rather bad luck. However I did want to play Texas Sharpshooter and point something out.

According to the NFPA, in 2010 there were 33 vehicle fires per hour. Assuming about 250 million vehicles on the road, that equates to a .0133% chance of being involved in a car fire over a 6 week period.

Comparatively, over the last 6 weeks, with approximately 16,000 Model S on the road, there have been 3 vehicle fires. This equates, to a .0188% chance of being involved in a vehicle fire. Over the last 6 weeks, it was statistically more likely to get in a fire while driving the world’s safest car.

Is this just a statistical anomaly of no consequence?

To test, I doubled the time period to see how sensitive the outcome is. In a 12 week period, the likelihood of being involved in a car fire in a standard ICE vehicle is .027%.

Over the last 12 weeks, there have still been only 3 Model S fires. However, there also were 5,500 less Model S’ on the road 12 weeks ago. When you hold the 3 fires but reduce the number of vehicles, I’m getting a .029% chance of being involved in a vehicle fire with a Model S, still higher than the ICE vehicle…

So double the time period to 24 weeks; you get .053% odds of being in an ICE vehicle fire, to .055% odds of being in a Model S fire. The lower number of Model S on the road keeps that number above the ICE. Again, Tesla loses, at least for now.

The trouble here again is the small data, and Musk could just be experiencing the worst luck in the world. However, at this point in time it’s worth noting we already have 8,000 vehicle years of data to look at. Depending on what you think the life expectancy is of one of these vehicles, that’s between 200-500 vehicle lifetimes.

I’m assuming the risk of a critical fire (being a pretty extreme event, not like regular wear and tear) stays about uniform throughout the life of the vehicle, not getting better or worse with age.

Now that’s not as good as say, 1,000 lifetimes of data. But because we’re so early in the Model S production schedule, keep in mind that every four months the number in percent of these vehicles on the road grows by leaps and bounds. After the next 3 months, we should already have between 500-1,000 lifetimes of data.

So maybe Musk is just really unlucky and the number settles back down with time. The difference between the rate soaring or dropping like a stone is as little as one major accident. Consider if we had stayed at 2 accidents, the Model S would easily be much safer.

However, from a vehicle usage standpoint, we are increasingly seeing plenty of data to make a judgement about accidents of the Model S in the day to day hands of consumers.

So the discrete nature of the accidents is still making this murky. But because we have so many Model S on the road, the impact on the standard deviation of the marginal accident diminishes pretty quickly. We could have fairly concrete data on the probability of a fire in a Model S as early as the fifth or maybe tenth fire.

The number of Model S’ on the road is going up, not down, so increasingly these vehicles are more likely to be seen in accidents. In another year or two, Musk’s claims of vehicle safety could get reconfirmed by a relatively safe lull. Maybe his car is just being bought by a rather more reckless segment of the population – unsafe first adopters – or bad chance? But at least as of this point in time, 9 months in, it really doesn’t appear that the Model S is all that much safer, from a fire standpoint, than a car full of flamable liquid. In fact, if things don’t turn around, it could be judged as worse.

I got smacked pretty hard today, with NRP, HCLP and BAS all taking blows. The earnings out of NRP and HCLP apparently spooked some investors, and BAS just sort of followed along.

I am not concerned about any one of these positions. The rest of the holdings were a pretty mixed bag.

I dare not address the Tesla selloff just yet, for fear I somehow jinx it. I refuse to report any of the numbers on my put position, as it is so small and just unpredictable. Suffice to say, the first batch of options expire with early 2014. The next two thirds of them expire with early 2015. I’ll mark them down as they expire worthless, or record the profits when I actually have something more concrete.

I bit into the 8% selloff this morning. By the time I got a nibble, it was a 6% selloff.

I don’t expect this to last. The earnings miss is a non-issue for a small company in a rapidly growing industry. And the hit was largely one time items that shouldn’t be a recurrent problem.

HCLP is a buy here on any dip. Especially as validation of the growing demand for frac sand continues to come in.

I hate it when Cramer highlights my stocks. If it were a regular highlight with some real work behind it, I wouldn’t mind. But HCLP came up in his caller segment, which is just the lowest of the low. Listening to impulse callers sucking up to Jim, desperately looking to make it “big time” as a pro, by way of offering up one of my best finds…it’s so horrible I can hardly stand it. That they then strip the thesis naked into a 30 second sound byte is enough to make my stomache churn.

Let’s call it what it is – intelligence rape.

But aside from that, the stock is pressing 4% returns weekly for me. It doesn’t get much more awesome than that. Since my first purchase at the end of August for $23.99, this partnership has been a little gold mine.

It’s high of the day was $33.80.

I won’t be selling for any price. This is a buy and forget partnership. I will do with HCLP what I regret not doing with TLP.