Most of the refiners are down today with ALDW apparently faring worst of all. Still, the drop is just 3.3%. Now, that might seem a lot to some but I am usually surrounded by higher risk plays so this isn't a great concern for me. As a matter of fact, it's an invitation to add, hoping a recapitulation will work in my favor.
I just added 500 units at $8.20. This brings my cost basis down to $9.50 with a loss of $14,800 on the books. Total positions: 11,500 units.
If the price drops to nearly $8/u, I'll have to add another 500 units.
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There's absolutely no doubt in my mind on this central issue:
The price will go up. maybe even higher than its recent trading range.
Or---it will drop further.
My fortune will be decided, to a point, by how this single holding fares as I now have 11,500 units with a current market value of $94,500.
We don't know how this quarter is treating ALDW. The crack spread is not improved over the previous quarter other than for the fact that oil has seen some degree of confidence market-wide. There's at least some benefit therein but I doubt it will lift refining margins meaningfully.
What I do know, however, is that ALDW will do no worse than most of the others and will likely be a bit better off owing to its MLP status. As such, 90% of available cash flow exceeding basic operational money must be meted out to partners such as myself.
I'm counting on absolutely nothing in terms of the next quarterly payout. Nada!!! But I can't ignore the fact that as we move through Winter, all these low cost units will possibly pave the way for massive gains to start gilding my path as we move through Winter, then Spring and finally---Summer.
That might seem like a long time to wait for a holding to ripen but it's just a half year. That's a short time for me and I'm older than you! lol So that leaves me thinking that today's $8 unit may well be a triple in less than a year and a likely double halfway through the year. And it begs the question:
When is a 50% NOT ENOUGH?
And how about 100% for a year of your money's working this way?
For what it's worth, today's uncertainties typically unravel quickly and if history holds true, ALDW will be trading back over $8.50 soon.
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So, yes---I'm taking a rather big chance with this. And if time proves me wrong, then what's the extent of loss?
I suppose the $8.20 units might drop back to $7.50---but not for long because many other investors will be ready to jump on that low valuation. That means I've set myself up for an additional loss of $8,000. That's not a lot to me in light of the already-sustained loss. But if things should pay off? Watch out above!
AI
