2024-01-29 18:18:11 ET
Summary
- Calumet Specialty Products is experiencing a falling knife pattern in the market.
- The company is comprised of three businesses, all of which are now performing well generating significant levels of excess cash.
- Calumet has several strategies in place to manage its debt, including a possible DOE loan and a partial equity sale of one of its businesses.
Even companies like Calumet Specialty Products ( CLMT ) with its brilliant future can experience the dreaded chart pattern labeled falling knife. Investopedia defines one , "[f]alling knife refers to a sharp drop, but there is no specific magnitude or duration…." Investors generally consider an unhindered drop without relief, a falling knife. This pattern is more prevalent with illiquid entities. Someone with a large enough position decides to exit regardless. Sometimes it is forced, sometimes not. We continue our coverage of Calumet with an update and a strategy suggestion. Dodging market falling knifes might require clever evasive action. Put on the athletic shoes and let's go dodging.
The Company & 4th Quarter
Calumet is comprised of three unique businesses: Performance Brands, high margin branded low volume specialty products, Specialty, higher volume, but slightly lower margin plus traditional fuels, and Montana Resources (MRL), the high margin, best in class renewable, fuels business. MRL products includes a very high margin jet fuel alternative labeled Sustainable Aviation Fuel ('SAF'). Also, MRL products are manufactured at the company's Great Falls' facility of which half continues as a traditional fossil fuel operation. Each business has had a level of challenges and high points in the past few years. It appears that all are now firing at full power....
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Calumet Specialty Products: Falling Knifes And Investor Irrationality