What I Sold: Pacific Ethanol (NASD:PEIX)
This entry continues a series on companies I sold as part of a portfolio
cleanup prompted by the mess on Wall Street. In the first entry I describe
I plan to do with the cash, and the second was about Carmanah
Technologies was one I didn't sell.
In May of last year, I took a look at competitive
forces in the corn ethanol industry. While I was rather negative on
the industry at the time, when ethanol stocks fell in the summer and fall of
2007, I called the bottom much too soon, and decided to dabble in the industry.
I thought that Pacific Ethanol's (PEIX)
strategy of arbitraging the costs of transporting corn vs. the costs of
transporting ethanol and distillers dried grains would lend them some protection
from industry overcapacity. Whatever protection they might have had was
not enough. With current liabilities exceeding current assets, and
operating cash flow from the last 6 months exceeding cash on hand, PEIX will probably
need to raise new capital to stay afloat, something I doubt they can do on
favorable terms in today's climate.
DISCLOSURE: No position.
DISCLAIMER: The information and trades provided
here are for informational purposes only and are not a solicitation to buy or
sell any of these securities. Investing involves substantial risk and you should
evaluate your own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to read the full