Replies to post #16260 on Value Microcaps Junior Energy

[wadegarret]

Peeker- PEIX & REX

Got lucky on both. I'd been getting pressure from family members to lighten up on my huge ethanol position, as I'd made over 100% in a few months, and I couldn't see more than 20% more upside. At that same time, KERX(a biotech I follow) got FDA approval, and went down from $18 to $15 on what I considered minipulation on misunderstood warning label concerns.

So I decided to sell all my remaining REX(sold half at $107) at around $105 to buy KERX in the $15s, and take a short term shot with KERX, taking the gamble that REX wouldn't fly back up, and I'd get back in within a week or two. When KERX kept going down to the $13s a few days later, I decided to start selling some PEIX at $23+ to buy more. I then on a whim(after watching REX getting hit), felt PEIX might be setting up for a retracement, despite being worth $27-$30 at the time. So I decided to sell the rest of my PEIX at around $23.

OK, so where do I think PEIX & REX go from here, and what are they worth ? Well with ethanol down to $1.80 and corn at $3.40, assuming they stay there for the next few months, I've reevaluated REX and PEIX valuations. Well first I think that because it appears, at least in the short term, that ethanol profits may actually come in lower for the Dec qtr than they will for the Sept qtr, that PEs going forward should be adjusted for the slower earnings growth. To be conservative, I would say around an 8 PE for PEIX, and a 10 PE for REX.

Since I feel(with ethanol at $1.80 & corn at $3.40) REX would still make around $2.40-$2.50/qtr, that would be a $100 target for REX. For PEIX, I figure they'll still post around $.65/qtr, after the additonal ownership, madera additional production, and about a 10% higher fully diluted share count going forward than in the june qtr. So about a $21 target for PEIX. Mind you, these are very conservative targets, and assume $1.80 ethanol and $3.40 corn, and in addition low Distiller Grain prices.

My price targets would go up or down quickly with good or bad news of course, and there are many possible catalysts in either direction as we know.