Why a Boston Fund Abandoned Its $15M Delek Position Amid a 60% Rally

BearMarketBard · 2026-01-04T15:30:17+00:00

Delek US Holdings has surged 60% in a year, but Callodine Capital Management exited its stake, raising questions about the fund's strategy. The shift aligns with a focus on less volatile sectors, as Delek's performance remains tied to market fluctuations and government support.

BearMarketBard

2026-01-04 15:30:17

Abstract generation in progress

Delek US Holdings (NYSE:DK) has been on a remarkable run, climbing 60% over the past 12 months and substantially outpacing the broader market’s 16% gain. Yet even as shares hit $29.66, one institutional investor made a surprising move in the opposite direction.

The Fund’s Exit Strategy

Callodine Capital Management revealed in an SEC filing that it completely exited its Delek stake during Q3, offloading all 717,245 shares worth approximately $15.19 million. The position had represented 1.57% of the fund’s assets in the previous quarter, marking a deliberate reduction of exposure to the refining sector.

This timing raises an important question: why step back from a winning position?

Understanding the Portfolio Shift

The fund’s remaining top holdings tell the story. Its largest positions now sit with:

SPB at $90.09 million (7.9% of AUM)
WWW at $74.13 million (6.5% of AUM)
VTRS at $68.72 million (6.0% of AUM)

These holdings lean toward consumer, financial, and asset-light businesses—a notably different profile than Delek’s capital-intensive refining operations.

What Delek Actually Does

Delek operates as a downstream energy company with three main revenue drivers: refining crude into gasoline, diesel, and aviation fuel; logistics services for petroleum distribution; and a retail fuel convenience store network. The vertically integrated model spans refineries across the southern and central U.S., serving oil majors, independent marketers, and federal agencies.

Recent financials show the company generated $10.67 billion in trailing revenue but posted a ($514.90 million) net loss. The company does pay a 3% dividend yield.

The Cyclicality Problem

Last quarter’s $178 million profit looks impressive against the prior year’s $76.8 million loss, but much of that swing came from a $280.8 million government exemption benefit rather than operational improvements. This dependency on government support and commodity pricing exposes the business to timing risks.

Energy markets remain volatile, and refining margins compress unpredictably. While logistics and retail segments provide some stabilization, they cannot fully cushion the downside when fuel demand softens or energy prices swing sharply. For a fund with a valuation-driven, opportunistic mandate, these characteristics may have triggered the exit.

The Takeaway

Callodine’s decision to lock in gains and redeploy capital reflects disciplined portfolio management. Delek may continue to outperform short-term, but its earnings remain lumpy, cyclical, and tied more to external market timing than steady compounding—precisely the traits that push conservative institutional investors toward the exits.

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