Alternative Energy pruning: Ethanol

In my March 25th post, I recommended two stocks PEIX (17.5 - 18.5) and ADM (35) primarily because of the the expected ethanol shortage suring MBTE phase out. Now it is time to take some of the profits off the table. Last month and half has seen PEIX almost touch 35 and ADM crossing 40. Both the shares trounced my conservative target for 4-6 months in almost a month and a half. One of the reason, might be the rising oil prices. Rising oil prices carry these alternative energy sources with them too for teh logic mentioned in previous posts.

I would prune the position to sell 1/3 of the PEIX holding. A conservative investor might sell 1/2 of PEIX and some ADM. I still like both these stocks for the long term, but PEIX has grown too fast too quickly. I favor selling PEIX as it is a volatile one product firm and I like cash profits more than paper profits. ADM on the other is a much bigger firm a negative ethanol due to easing of the oil prices will not affect the stock that much.

Here is what I suggest.

ADM put a trailing 8% trigger as it has already fallen 8-9% from the latest peak and at 8% it will breach the latest support. Adjust it to 12% if the stock reached 44.

PEIX put a trailing 8% (Same logic as above) adjust to 15% if stock crosses 37.