Pacific Ethanol Inc (NASDAQ:PEIX)‘s stock has been on a steady decline since mid-May losing about 37.2% of its value. However, the stock was gaining traction today ahead of the release of its financial results on Wednesday, and had risen by almost 10% by midday and then retracted to around 3%. The company is expected to deliver an EPS of $0.09 and revenues of $265.22 million for the second quarter.
Considering that Pacific Ethanol Inc (NASDAQ:PEIX) is trading just 8.9% above its 52 week low, concerns that the stock might be oversold could be one of the reasons why the stock is trending higher today. In fact, from the perspective of technical analysis this hypothesis is confirmed by the Relative Strength Index (RSI), which stands at 28.68 for Pacific Ethanol Inc (NASDAQ:PEIX) signaling an oversold range. Whether this is just a dead cat bounce or the beginning of a prolonged upward trend for the $308.10 million leading producer and marketer of low-carbon renewable fuels in Western U.S. will be more clear after Wednesday.
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As far as the moves of professional money managers are during the first quarter are concerned, Pacific Ethanol Inc (NASDAQ:PEIX)’s prospects look promising. Among the hedge funds that we track a total of 20 funds had an aggregate investment of $64.48 million in the company at the end of March, up from 17 firms with $58.75 million at the end of the previous quarter. The stock was trading nearly sideways during these three months.
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Insider trading is another useful indicator that reflects the management’s take on the company’s future prospects. However, unfortunately no such activity has been detected in Pacific Ethanol Inc (NASDAQ:PEIX) so far this year.
What does the smart money think about Pacific Ethanol Inc (NASDAQ:PEIX)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long Pacific Ethanol, up from 17 funds a quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially.
When looking at the hedge funds followed by Insider Monkey, Dalton Investments, managed by Gifford Combs, holds the largest position in Pacific Ethanol Inc (NASDAQ:PEIX). Dalton Investments held 1.49 million shares valued at $16.1 million, followed by Vertex One Asset Management, led by John Thiessen, which owns 1.12 million shares. Other hedge funds that were bullish during the first trimester include Remy Trafelet’s Trafelet Capital, Israel Englander‘s Millennium Management and Robert B. Gillam’s McKinley Capital Management.
Moreover, the aforementioned Trafelet Capital, initiated the largest stake in Pacific Ethanol Inc (NASDAQ:PEIX), which comprised 986,000 shares valued at $10.6 million at the end of the March quarter. The other funds with new positions were Jim Simons’s Renaissance Technologies, Dmitry Balyasny’s Balyasny Asset Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Keeping in mind the current low valuation of Pacific Ethanol Inc (NASDAQ:PEIX), the positive hedge fund sentiment and also the fact that even though the company missed estimates in its last quarterly financial results, it delivered hefty earnings surprises in the two quarters prior to that, we consider that the stock is a ‘Buy’ at the moment.
Disclosure: None
