Corn prices have dropped substnatially in the last few weeks from above $4 to $3.18 on the front month contract and were limit down the other day. At the same time, oil is nearing 2006 highs and could easily go higher if hurricane season meets predictions. Ethanol stocks (VSE, AVR, USBE, etc) are near their lifetime (albeit brief lifetime) lows. Margins could expand substantially over the coming months, possibly leading to a blow out Q3. The one negative I see is that the price curve on ethanol on the CBOT is heading down in coming months. But again, hurricane season coming . . . We could see a return of the 35% gross profit margins in Q3 '06. I'm liking VSE in particular. Any thoughts?
Anyone Looking at Ethanol stocks?
- Thread starter U Boat Commander
- Start date
I have a feeling, the way VSE is trading, its going to be good...let us see...I dont have a position, but just curious to see which way it will go today.
VSE announced a major acquisition today of three ethanol plants that will amount to an additional 330M gallons/yr of capacity and they paid a small premium to construction costs for the plants. Within a year VSE will have the capacity to produce nearly 1B of ethanol a year. The conference call was extremely upbeat with analysts congratulating the company on a great deal. There was also some commentary about the recent slide in corn prices. I recommend listening to the call. Here's a link to the press release:
http://biz.yahoo.com/prnews/070723/aqm093.html?.v=14
VSE traded well today but topped out at the 20d EMA. If it trades above $15.10 tomorrow, I would not be suprised to see it back at $21 soon. Of course, everything depends on corn and oil prices. . . And corn continued its slide today to $3.10.
Just as an aside, I also noticed that soy bean oil was crushed today as well (no pun intended). Could be good for companies that are actualy producing biodiesel such as ABDS and the upcoming REG and Imperium IPOs. Although I would call these plays much more speculative than VSE and other ethanol stocks, which may actually be a good value at this point.
http://biz.yahoo.com/prnews/070723/aqm093.html?.v=14
VSE traded well today but topped out at the 20d EMA. If it trades above $15.10 tomorrow, I would not be suprised to see it back at $21 soon. Of course, everything depends on corn and oil prices. . . And corn continued its slide today to $3.10.
Just as an aside, I also noticed that soy bean oil was crushed today as well (no pun intended). Could be good for companies that are actualy producing biodiesel such as ABDS and the upcoming REG and Imperium IPOs. Although I would call these plays much more speculative than VSE and other ethanol stocks, which may actually be a good value at this point.
