Pacific Ethanol stock continues to gain day over day, but why? There has been no real big news on the stock since earnings a few weeks ago. However, PEIX stock keeps moving higher. Why is PEIX going up?
Thanks for asking. There are a few main drivers here.
First, when compared to its closest matching company in the same industry, Green Plains Renewable Energy (GPRE), Pacific Ethanol is GREATLY undervalued. GPRE is trading above $40 a share and PEIX should be much closer to this. Although GPRE has a much larger output of ethanol PEIX sees big advantages over GPRE due to their location of plants being near where they sell their ethanol; cutting significantly into their cost of goods sold. Many believe these companies should be trading in the same range and GPRE is not moving downward any time soon, so PEIX must go up.
This brings us to our second point, Institutional Investment. Large institutional investors are quickly catching on that this is a company with a very nice growth opportunity due to low corn prices, good ethanol prices and the pay down of most of Pacific Ethanol's debt. If you look through the volume of the stock you'll notice there are decent size buy orders coming in for 30,000 and 15,000 shares at a time multiple times a day. The institutions know that if they buy too much too quickly the price will swing, much like this stock used to do prior to the institutional investment in it.
So day after day, the big boys are adding. Companies like Black Rock, Credit Suisse, and Vangard know they can't load up all at once because that would cause a spike and they would drive the price up too fast. It's better for them to add in 15k and 30k chunks over weeks instead of all at once. Look back through the volume and you can see these large chunks being bought all throughout the day.
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