The game of investing is often very counterintuitive. From an early age, value investors like myself are taught to invest in companies that are cheap. Traditionally cheap means that some metric of measuring value, such as the price-to-earnings ratio is a low number. However, as one becomes more experienced as an investor they usually learn that with certain stocks, namely cyclicals, investing in low P/E stocks is often the worst thing that one can do. Companies that are at the peak of their earning cycle, such as airlines after a precipitous drop in the price of oil, frequently have super low P/E multiples because savvy investors and funds realize that the tide is about to turn and have begun to sell their shares. So the price of the stock drops and they look cheap when focusing on the company's earnings from a couple of months ago, but investors who buy into these stocks because of their cheap metrics often enter into a value trap and are burned as the future profitability of these cyclical stocks turns downward. While on one side of the coin, this phenomenon can be a trap for certain investors, on the other side it can create great buying opportunities. In April of last year, I purchased the stock of a company both in my on-line special situations portfolio and in real life, that had absolutely terrible metrics. The company was a Master Limited Partnership that was paying out way more money to investors in distributions than it was earning. Why on Earth would anyone invest in a company that isn't making enough money to even cover its distribution? Because I believed that a bargain was being presented for investors who could see that help was on the way. The company that I am talking about is Calumet Specialty Products Partners, L.P $CLMT. Calumet is a refiner, but it's a little different than many other refiners that just refine fuel. Yes, $CLMT does produce fuel, but it also makes nearly 5,000 different specialty products, including motor oil, baby oil, asphalt, waxes, drilling fluid, and on, and on and on. As I mentioned, at the time I invested in $CLMT, Q1 2014, its quarterly distribution coverage ratio was an unattractive 0.94x. A ratio of less than one means that the company does not have enough cash flow to cover its distribution. Investors all over message boards and in articles in places like Seeking Alpha were freaking out that the company's distribution would have to be cut. I wasn't so sure. Why? I believed that this figure was being held down by a ton of scheduled maintenance at $CLMT's facilities that was temporarily depressing its results and better yet help was on the way in the form of a number of new projects that the company had already spent a ton of money investing in, but had yet to see any benefit from. Well, that help has started to arrive. In early May, Calumet announced that it has commenced operations at the first new refinery built from scratch in the United States since 1976. Dakota Prairie Refinery Commences Startup Operations http://finance.yahoo.com/news/dakota-prairie-refinery-commences-startup-124500798.html The Company estimates that once this new facility is fully ramped up, it will contribute $30-$35 million in annual EBITDA, representing an impressive 23% return on investment. In addition to the new Dakota Prairie facility, $CLMT has an expansion of its Missouri Esters facility, which is expected to result in another $8-$12 million in annual EBITDA, its San Antonio Refinery solvents project ($20 million in annual EBITDA) and an expansion of its Montana Refinery ($70-$90 million) all queued up and scheduled to come on-line over the next year. These new projects are set to cause the company's distributable cash flow to soar. (click to enlarge) In investing, it's not always where a company has been that is important, it's where it's headed. I love it when companies have terrible current metrics that result from significant investments in new facilities that have not come fully on-line yet. That's the time that savvy investors swoop in and scoop up shares. Including distributions, my initial investment in $CLMT has underperformed the S&P 500 by 1.33% over the past 14 months, but I believe that underperformance is about to change. With a massive 10%+ yield and a coverage ratio that has soared to 1.6x, I believe that Calumet Specialty Products Partners, L.P $CLMT is one seriously cheap stock. As its new projects continue to come on-line its going to get even cheaper and Mr. Market will likely eventually reward it accordingly. A one-year chart of $CLMT vs. the S&P 500 (click to enlarge)