Investor's guide to Blue Ridge Capital's positions in 3Q 2013

Part 2

Why did Blue Ridge Capital buy a position in PBF Energy?

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According to 13Gs Blue Ridge Capital filed last month, the hedge fund disclosed new positions in Zulily (ZU) and PBF Energy (PBF). The filings stated that Blue Ridge currently owns 6.05% in Zulily, with 799,811 shares, and a 7.82% stake in PBF, with 3,095,000 shares.

A November 13G filing showed that Blue Ridge increased its position in Avis Budget Group (CAR) and at present owns a 6.17% stake, with 6,613,700 shares.

For more information on Blue Ridge Capital and its investment strategy, please see the last part of this series.

Blue Ridge Capital’s top new buys in 3Q 2013 per its 13F filing were American Homes 4 Rent (AMH), Tesla Motors Inc. (TSLA), Cliffs Natural Resources (CLF), and BlackBerry Ltd. (BBRY). The hedge fund exited its positions in Owens Corning (OC), Equinix Inc. (EQIX), and Realogy Holdings Corp. (RLGY).

Blue Ridge Capital’s two largest stock holdings are Inc. (PCLN) and American International Group Inc. (AIG), which account for 4.88% and 4.52% of the hedge fund’s portfolio, respectively.

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Why buy PBF Energy (PBF)?

Blue Ridge revealed a 7.82% stake in one of the largest independent U.S.-based refiners, PBF Energy, in December 2013.

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The company reported a net loss of $19.8 million in its recent 3Q 2013 results, and cited a negative impact of approximately $40 million in renewable identification numbers (RINs) expenses in the quarter. RINs are attached to each gallon of renewable fuel produced to ensure that companies within the industry are allocating the required quantity of renewable fuel in on-road fuels. The company believes RINs cost will drop in the fourth quarter based on the expected publication of the EPA’s adjusted requirements for 2014.

In October 2013, PBF Energy’s subsidiary filed a Motion to Intervene in lawsuits previously filed by Monroe Energy and API against the EPA (EPAZ), challenging the Renewable Fuels Standard (or RFS) standards for 2013. PBF also filed a Petition for Partial Waiver of the RFS mandate for 2014.

In August last year, PBF Energy announced plans to spin off its logistics assets into an MLP. The company said its indirect subsidiary, PBF Logistics LP, has registered for a possible listing of its limited partnership units. PBF Logistics LP, a master limited partnership (or MLP), will comprise certain logistics assets to be contributed by subsidiaries of PBF Energy. PBF Energy Inc. will indirectly own the general partner of the proposed MLP, PBF Logistics GP LLC, as well as all of the incentive distribution rights.

In 3Q 2013, the company announced a quarterly dividend of $0.30 per share. PBF recently announced that funds affiliated with First Reserve Management and Blackstone are to sell 15 million shares in a secondary offering priced at $28 per share.

Industry experts believe the passing of the MLP Parity legislation will prove beneficial for renewable energy companies.

PBF is an independent petroleum refiner and supplier of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products. PBF currently owns and operates three domestic oil refineries and related assets, which it acquired in 2010 and 2011. PBF’s refineries have a combined processing capacity, known as “throughput,” of approximately 540,000 barrels per day.

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