PBF Energy (PBF)

[cookiemonster]

PBF caught my eye due to (i) insiders buying $3M worth of stock since June; (ii) Baupost's 48% increase in its position - to 16% of the company in September; (iii) one of the widest dividend yields in the refining space; and (iv) general pessimistic view of the refining sector by the sell-side. Just getting started digging into the story and hoping someone might have some insight as to what Baupost see's here. A lot bear arguments to be made:

 

(i) Brent/WTI narrowing (I know they can run heavies at the coast, but still impacts midland and ability to rail to the East Coast).

(ii) Looks like they will be FCF-negative for at least the next two years as they invest in recently acquired assets.

(iii) The EU and even China have been stepping up imports to the East Coast.

(iv) Citgo is looking to bring a refinery back online in Aruba that would service the East Coast.

(v) The very short ownership period at Torrance has already been rocky.

(vi) Above avg. product inventories in mogas and distillates.

(vii) RIN expenses continue to go up.

(viii) If we see a gap up in rates and MLP valuations trade-off, the MLP "arb" may go away and this would impede PBF's ability to de-lever the balance sheet.

 

Would love to figure out what I'm missing here. I am by no means an energy expert.

 

Thanks!

[undervalued]

I am betting on the jockey for this one and then he retired. It's down close to 6% today because of the flare up in Torrance, CA.

[cookiemonster]

Guess this could be one reason: http://www.reuters.com/article/usa-gasoline-kemp-idUKL8N1CI4DH

 

[awindenberger]

I recommend you take a look at Western Refining (WNR) if you are looking for an undervalued refiner.