Sold out NDN UP 30% new position CLNE

18 Mar

My logic for purchasing 99 Cents Stores Only were its deep value, growing positive economic fundamentals for the business and consumer bias towards value in the face of food inflation – the price of milk, eggs, bread and gasoline. Consumers in this environment tend to purchase fewer ipods and consumer electronics and focus on the bread and butter.  The buyout offer from Leonard Green and Partners offers a good opportunity for the private equity firm to scale up the business across the US growing their base out of California. Even at the buyout valuation at approx 10X this mirrors the peer valuation for the group and is still fairly cheap. The primary headwind for the group is increasing commodity costs which will pressure margins; however, the products normally shelved at such franchises are normally sub-tier for the most part which should ensure margins at least remain appropriately profitable and with higher purchase volumes this should allow value franchises to mitigate cost pressures.

Clean Energy Fuels Corp (CLNE) is the latest addition with a purchase px at 12.9 this stock offers incredible value. Fundamentals normally drive stocks and if the Street appreciates the value of LNG for transportation then CLNE is going to be a significant gainer. T Boone Pickens is the largest stockholder and he has a very good record in the energy sector. I don’t necessarily believe the bias here will be towards clean energy but instead simply because LNG is incredibly cheap compared to oil and there is an abundance in the US and Canada. However, the infrastructure for transporting LNG and natural gas pipelines still need a lot of development across the US and CLNE can certainly aid that process. Not too long ago CLNE had good support around $20 so now that the company is profitable and with a 60% increase in YOY sales these are good drivers for a lot of strong upward momentum in the stock.

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