Calumet Specialty Products Partners, L.P (CLMT)

proudfather (< 20) Submitted: 7/08/08 2:43 PM : Start Price: $11.88 CLMT Score: 31.55

A small refiner. Seems to be a very well run company. All the refiners are getting hit hard as the price of oil has skyrocketed. The price between what a refiner pays for its oil and what it sells its finished products for is called the “crack spread.” Since the price of oil has risen faster than they can raise their prices on the finished product, their crack spread is getting squeezed and net profits have fallen drastically. Management has already begun incremental price increases on their finished products. Their shares have fallen from about $55 down to $12 a couple of weeks ago. I was getting ready to buy then but the price shot up to $17 because of massive insider buying. If you go to a one of the stock tracking pages (msn, yahoo, etc.) and look at the insider buying you will see what I am talking about. This fact made me even more excited than I was before. I decided to wait a few days in hopes that this would subside and the price would come back down. So far I have been right; the price is now around $12 per share and I am looking at buying. Once they are able to raise their prices and increase their crack spread, the stock price should rebound to at least $30, if not more. That would be a doubling of your money and I don’t see why this could not happen in less than two years, giving you a very good return. What I really like about this stock is its current dividend yield. They are currently paying $1.80 per year, which at $12 per share would be a yield of 15%. They recently lowered their dividend from $2.56. There is no guarantee they will not lower it again, but I think when they get their profitability back there is a good chance they will raise it back, hopefully to the $2.56 range. This would be a yield of 21% if you lock in at $12. If I am correct, then this is a home run all the way around. I am extremely excited about this one.

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