This chart pattern with the constant bumping against the support line (about $13.00) with declining highs is a descending triangle. This is generally considered a bearish chart pattern. Short-term, pressure appears to be building leading to a downward move. This is a probability call. It does not have to happen. This is true of any projection in the market.
Fundamentally, Calumet could triple its cash flow in the next two plus or minus years. These are not small numbers. I am not saying you “should sell’ or “should hold” at this time. I am just giving an opinion on the chart (above) and fundamentals (below).
We each have our own risk tolerance, personal cash flows and willingness or ability to commit. So, I am coaching and telling you the lay-of-the-land. Calumet, the company, is in an enviable position. No new refineries have been built in the USA since 1976. None will ever likely be built in the USA ever again. Calumet is one of the newest and most efficient refineries in the USA. They have shifted to being able to process both fossil fuels and Bio-materials. The Bio-material production is expected to begin in December of this year.
EBITDA has the potential to increase from a $150M / $250M range to $400M / $500M range in the next three years. The company is paying down debt. Calumet initiated a $0.01 per month dividend that we expect to see increase steadily over the next three years. In 2016 they were paying a $1.60 annually rate in dividends. I have no basis for saying this, but I suspect the dividend will grow into the $0.12 to $0.16 per month distribution rate.
Management and multiple blog commentators use $55 to $60 as a target price for CLMT over the next three years. This is no small goal. What the stock will do in this bear market in individual stocks is unknowable.
If you don’t own CLMT today, You might start will a very small share position and add to that position over time. It is easier to track a stock if you have it in your portfolio. I carry a number of one to ten share positions in a LOTM related account for that purpose.
Calumet is a good company to own. Fossil fuels are not going away in my life time and probably yours. Are governments’ war on fossil fuels putting WD-40 (lubricants) and Lorel (cosmetics) out of business? These are clients of Calumet. Are we going to stop using electricity (transformer oil) or refrigeration (refrigeration oils). This war on fossil fuels is going to drive us into the poor house and the stone age. We can replace these products but not in the time line dictated. We have to get smarter leadership into public office. Sorry for the frustration. When governments drop the supply of base-load energy (pipelines, coal, oil & gas) before they have a replacement for base-load energy (Nuclear), it is not good leadership. Demand for refined products was growing faster than our ability to refine product before the covid experience. It has only grown worse since then. This link is to the multiple “products” and industries Calumet supplies components.
With a longer-time horizon than two to four months, Calumet has potential to be a $40 to $60 stock. We think you are looking at a three to four year period for that goal. If the share get cheaper you need lass money to get to shares required to hit the goal. It is a way of thinking.
- Do some personal calculations.
- How many shares of Calumet do you need to own in order hit your financial goal of fill-in-the number if the share price hits $50.00 in four years? $100,000 the goal? 2,000 share at $13.00 is $100,000 at $50 per share. Play with numbers.
Look down the road not over the hood!
Should the share price break lower, it is not a panic time, it is a GREED time. A tool or vehicle to help you reach your financial goal. When you are learning to drive, the instructor tells us to look down the road, not over the hood. The same principal applies here. What do you want? What do you have to do to get there? What stocks do you need to own to get you there.
Written by Tom Linzmeier editor, LOTM, June 16, 2022.
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
Please refer to our web site for full disclosure at www.LivingOffTheMarket.com ZTA Capital Group, Inc.
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