Two Plus Two

I used to watch the "A - Team", a very corny show with Mr. T. They would always have some crazy plan utilizing all their skills. At the end, their leader would say, "I love it when a plan comes together".

Now consider two headlines today on two MFI stocks:

HOC - they talked about higher margins by increasing their usage of cheaper low grade oil (Holly Stock Rises on Margin Expectations). You can read the article, but the key point is they are going to ramp up their usage of lower grade oils from 5,000 bpd to 50,000 bpd. The analyst estimates that would be worth $15 a barrel in higher margins. That seems pretty exciting. In a quarter, if true that would = 15 x 45,000 x 90 = $61m. That is huge. HOC averaged making 110m in operating earnings quarterly in past 4 quarters. Makes you wonder why the stock only went up 31 cents? Now the second headline and the plan coming together.

HW - remember this stock? I have lost a fair chunk of change on HW. But if go back and look at my posts a year or so ago, I mentioned they had a proprietary technology to help refiners use low grade oil more efficiently. Interestingly, they were up 9% today as they had an analyst's day (Headwaters Incorporated Comments on Sixth Annual Analyst Day Conference). Now if you bother to read that link, you'll see them comment on their HCAT technology.

Ready to connect the dots? HW is located in Salt Lake City. One of HOC's refineries is in Salt Lake City. It seems quite clear to me with these two things being on the same day and the two sharing Salt Lake City that they are related. Now if HW has a proprietary technology that can save a medium sized refiner like HOC $240m a year, then what is that technology worth?

Disclosure: I will be buying HW on Tuesday.

I did close and then "re-buy" my JTX position yesterday. At $20.29 it seems so so cheap. I know there are issues with lending the people their money when they file taxes. But I think some compromise will be found and it should not knock over 33% off the value of a company. Taxes seems pretty recession-proof to me.

Finally TCK had some excellent news (Teck Cominco Reports New Billion Tonne Copper Resource at Quebrada Blanca). Now think about that. A Billion Tonnes of Copper. I guess that is a metric tonne. A metric tonne of copper is going for $8000. It will obviously cost $ to mine it, but that seems like it will be worth a lot. I was surprised TCK was only up a couple % on the news.