This Knight Is Ready To Battle Back

Summary

  • Blueknight Energy Partners is an undercovered name that has a been a disaster for its investors.
  • Are other investor's severe losses a source of potential returns for this unloved knight?
  • The company is improving its fiscal house and although the charts are scary, there is evidence of stabilization in recent weeks.
  • Governments need to fix their roads and they need asphalt to do it.
  • We expect the stock to battle back thanks to a much better 2019 and as such contend the market should start baking these realities into the stock price soon.
  • This idea was discussed in more depth with members of my private investing community, BAD BEAT Investing. Start your free trial today »

Blueknight Energy Partners (NASDAQ:BKEP) has a been a disaster for its investors. For a little bit of the back story, we will point out that earlier in the year the company had plans to cut the dividend by approximately 30%. This was discussed Q1 2018 earnings report. As if that was not enough to hit the stock hard, it turned out to be a much worse 45% cut to the distribution. Cut nearly in half! As we have continued to move forward, the stock has faced additional pressure as investor concerns have mounted over declining margins in certain business lines.

Source: Blueknight

What do we mean by such pressures? Well, while the company's asphalt terminal business continues to perform well, margins have declined for the Cushing oil terminals side of the business. The oil market, which we follow somewhat moderately given our recommendations in other stocks like HollyFrontier (HFC), Exxon (XOM) and Royal Dutch Shell (RDS.A) (RDS.B), has had some issues with contracts and futures pricing. They have entered a state of backwardation, and that hurts the forward prospects for a partnership like Blueknight, at least in some lines of the business, which we discuss a bit more below.

Blueknight Energy Partners has lost more than half of its value in 2018. In or opinion, this is overdone. We also think the stock is set to stabilize here. Even though the chart is ugly, it appears the stock is trying to find solid footing after all of this time. The 5-year, two-year, and 6 month charts are scary, but the latter shows stabilization is occurring.

5-year chart:

Source: BAD BEAT Investing

2-year chart:

Source: BAD BEAT Investing

And the 6 month chart, where we have traced some action:

Source: BAD BEAT Investing

Here we are seeing just a disgusting series

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This article was written by

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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in BKEP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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