Close Trade: PBF Logistics LP
It is time to close the short-term open position in PBF Logistics LP (NYSE:PBFX). The position was established on March 31st, 2016 to take advantage of an expected gain on the first quarter earnings and dividend announcements. On April 28th, the company did announce a $0.42 per unit distribution, which was 2.4% higher than the previous quarterly payout and up 20% year-over-year. It makes a person wonder how a quality energy infrastructure company can grow its distribution by 20% and yet the unit value is down 16% over the last year. Just one data point that shows the irrational nature of much of the energy sector sell-off.
When the trade was recommended, I set a target price of $20.10 to achieve a quick 8% gain. The target was reached by late April, but since the price was trending higher, I let it ride and we have picked up an additional 4% in gains. However, since last week’s earnings release, the PBFX unit value has trended flat, so it is time to get out.
There remains an open trade in PBFX on the long-term positions list established way back in September 2014. That was near peak values for the energy sector, so I have kept the position open to let the ongoing distribution growth bring the trade back to even or slightly positive. The PBFX quarterly distribution rate has grown by 162% since the fall of 2014, yet the share value is still down about 25%. Again amazing! It appears the longer-term position in PBFX will remain open in the 30 Day Dividends position list for another quarter or two.
Recommendation: Sell the PBFX units purchased on March 31 today to lock in your gains.
At $20.80 per unit, the raw gain will be 11.8%. The trade was open for 36 days, resulting in a 119% annualized return.