Will Depressed Valuation And Cash Give PBF Energy (PBF) Asymmetric Returns?
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Third Avenue Management, an investment management company based in New York City, released its “Third Avenue Small-Cap Value Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. During the quarter, the fund returned +8.35% compared to +10.15% for the Fund’s most relevant benchmark, the Russell 2000 Value Index. Year-to-date the fund returned +8.30% compared to +9.22% return for the Index. The fund’s cash holdings declined to 12.9% during the quarter from 14.6% at the end of the preceding quarter. For more information on the fund’s top picks in 2024, please check its top five holdings.
Third Avenue Small-Cap Value Fund highlighted stocks like PBF Energy Inc. (NYSE:PBF) in the third quarter 2024 investor letter. PBF Energy Inc. (NYSE:PBF) is a company engaged in refining and supplying petroleum products. The one-month return of PBF Energy Inc. (NYSE:PBF) was 6.54%, and its shares lost 29.05% of their value over the last 52 weeks. On October 18, 2024, PBF Energy Inc. (NYSE:PBF) stock closed at $33.70 per share with a market capitalization of $3.948 billion.
Third Avenue Small-Cap Value Fund stated the following regarding PBF Energy Inc. (NYSE:PBF) in its Q3 2024 investor letter:
"Alongside those changes, the Fund also established new positions in two companies, SandRidge Energy (“SandRidge”) and PBF Energy Inc. (NYSE:PBF). Curiously, while both companies have “energy” in their names and both operate in the oil and gas industry, they have very little in common in terms of fundamental business drivers. PBF operates a portfolio of geographically diverse refineries, which is a business not directly linked to commodity prices per se, but rather to spreads and differentials among commodity prices and refined product prices. In other words, refinery spreads and, in turn, margins, profitability, and cash flows are driven by a wide variety of factors that are not directly linked to oil and gas prices. What does link the two companies together, at least in our minds, is ostensible cheapness as measured by cash flows and replacement value of the assets, as well as the exceptional condition of both companies’ balance sheets.
