....we got you some metallurgical coal (yes!)
....we got you some natural gas (yes!)
....we got you some homebuilder...
... I said... we got you some homebuilder...
Ruh roh Raggy!
No wait! Homebuilders are the new darlings of '08... so I got you some metallurgical coal (steel play), with some natural gas, WITH a homebuilder, and as a cherry on top a financing division! Bonus!
What does that give you? Put it in a pot, mix it all about ... 100% gains since the January 2008 low. Nice!
So if the 2nd half "no inflation but enough inflation so that commodities boom, but not enough that it hurts US consumers, so they can buy houses, so therefore you must buy homebuilders, and then credit markets clear up perfectly so we can finance those houses" scenario works out (and don't you dare believe it won't) this looks like the 1 stock you can play all those trends, under 1 roof. Wowsers! They reported tonight and while the housing/financing side was a disaster (nevermind that, it will be the strength of the company in 6 months), I was interested in the coal side of the business which is.... booming.
- Walter Industries also announced today that it has settled approximately two million metric tons of its 2008-2009 metallurgical coal tonnage in excess of $315 per metric ton FOB Port. The Company expects to settle another 1.1 million metric tons over the next few weeks in a similar price range and has an additional 0.6 million metric tons available for the second quarter 2009 that will be priced later this year.
- "Continuing supply constraints and robust demand in the international steel market have set the stage for ongoing strength in metallurgical coal pricing beyond the 2008-2009 contract year. With about one million tons of incremental production capacity scheduled to begin coming online in the second half of 2008 and approximately two million additional tons coming online in the first half of 2009, we are very well positioned to take advantage of the strong market for our coal."
Q1: $8
Q2: $20-$21
Q3: $75-$81
Q4: $90-$96
So as you see the "strong dollar" is not going to do diddly unless it appreciates by say 750-900% by next year at this time... at which point I'd still be a bull on coal. As long as those Chinese want steel at any price, we are happy campers. I am trying to hand you a gift here, so that you make enough money so that EVERY reader can invest in my mutual fund when we launch in 2009 (right?) - remember, coal is going to be next year's fertilizer... with CNBC anchors aghast at coal and wondering "where did this all come action come from, I thought the bubble ended last year with that stupid potash!". I'm telling you now, a year ahead of time. I'm using Alpha Natural Resources (ANR) and Massey Energy (MEE) more specific for the metallurgical coal but any coal name has some exposure. [Apr 8: Changing Coal Allocation - Peabody Energy Out - Alpha Natural Resources In] I did a full analysis in that entry comparing the 2 names and potential profits/upside.
So this 1 blog entry here, will pay for your yearly subscription to my website - that's how much you can make. What's that? It's a free site? Ok ok... details details. If I did charge - you'd be making it up in spades from this 1 entry.
Missed fertilizer? Get coal. So you can tell your friends next year you were there first. Come back in 1 year, book some profits, send check to my fund and we are all happy. In the meantime, you can sort of laugh quietly to self when CNBC tells you it's time to get out because the dollar will be going up 7% vs the Euro in the next 2 months. And when the stocks fall because the hedge fund computers say it's time to buy Macy's instead... you just shake head in mock horror.
(please note the above is not advice from me, telling you, what to buy because that could put me in liability - I'm just giving you a theoretical situation - if you buy coal stocks and lose 90% of your holdings that's your fault) ;)
Long Alpha Natural Resources, Massey Energy in fund and personal account
13 comments:
Notice you're not holding KHD right now. Highest volume since the December sell-off, punched right thru the 200 SMA.
OK - I'm long in fert/coal and taking a real beating here. I'm sort of confused. If this is a massive rotation and will continue then I'll need to take my losses and rotate too. Any advise on dumping some of this to "rotate" to WLT? If it's going to be that big of a winner then we should all go pretty heavy in it.
How can we determine if this is a minor coal/fert correction or a massive rotation?
Thanks!
will it not make sense for an average investor to gradualyy accumulate KOL (coal ETF) if your coal-to-be-big is right?
KOL is an easy way to play it, but TraderMark being a mutual fund will buy the equity instead. Mark is only using ETFs to short the market. I like Arch Coal, Peabody, Mechel, and Massey.
cm, thanks for the heads up. I wish I had some sort of screening software that alerted me to such things. I am just watching things by eye, and too many names to keep track of. That is one undervalued stock. Any reason it popped? It's been dead for a while.
Link! You either need to believe in a thesis or not. Fertilizer stocks and most commodities are very volatile. Either you need to be a long term holder or adapt trader. I'd recommend you look at the long term chart (1+ year) in 3 month increments to see the massive swings. If you cannot hold through those swings and or time them you probably are not suited for it. This "sell off" is nothing compared to what they have done in the past. A few days last August and last January the stocks were losing 15% in 1 day. We've only dropped like 15% or so in a week... that is nothing. That said, I was probably selling when you are buying if you are down... I was selling a week ago in the 130s for MOS for example and POT in 210s. I am beginning to buy back now, but I am aware they can fall another 10-20% for all I know.
WLT is no different from the other coal names so it would not make sense to sell a fertilizer to buy a coal if you are trying to avoid the rotation...
re: How can we determine if this is a minor coal/fert correction or a massive rotation?
When you can give me that answer you will become the most sought after man on Wall Street. No one knows. It could be over today, in a week or 8 weeks.
Again keep in mind, with WLT or any coal I am talking 12-18 months out when this earnings expansion really takes out. It is like investing in fertilizer a year ago. That doesn't mean straight up, or that the upleg begins anytime soon. I just am looking for ideas with earnings explosion potential down the road. When the market chooses to reward the stock is random. I had Gafisa for 6 months, and it went up, down but finished up to Tuesday at the same place I bought it in November. Then in 1 day it added 15%. So if you are trying to just buy things for a 1 or 2 week victory you need to become a technical trader and learn a whole different set of rules.
piazzi, I generally prefer individual names but if you just want a lower risk entry without researching the individual stocks I think KOL gets you into the space
Wrote about it here: http://tinyurl.com/6qpzdo
The one ETF I do think that probably is better than individual stocks is the solar ETF: TAN - because solar we don't know who the eventual winners will be. And there is a lot of individual company risk. Whereas in nat gas, coal, agriculture it's a lot easier to pick individual names.
Good questions.
In my eyes this is a HUGE SHORT opportunity.... after such a run up folks must want to be taking profits. I know I would. Not a recommendation but an observation.
KHD " Any reason it popped? "
Haven't found anything, yahoo mb has a post about an OTC subsidiary with great earnings, but its the yahoo mb so...
I'm just going to trust the price action on this one given its strong fundamentals. You know how they play the game, one of my longs (HRBN) popped two days back and got an analyst upgrade today...
I just checked WLT. The Forward P/E is just under 8 and low target is 73 and high target is 103.
One day street will realise the potential and it will be too late to getin. It popped 7% this morning. Formed a hammer on chart.
I work in locomotive business and I know how much huge demand we are seeing. HUGE BACKLOG. I'm sure they need these extra trains to haul coal and fertilizers:)
I like coal and fertilizer long term even when the cycle changes. First, these companies are making money, and that's not going to change (barring some new tech that renders their product obsolete). Second, look at the growth in Chindia. Sure, it can slow, but their need for coal (energy/steel), and food isn't going to go away. Look at the countries that are now flush with oil profits. The smart ones are spending those profits in preparation for when oil goes away. I know a guy who does construction in Dubai. Think multiple buildings, bigger than the WTC going up all at the same time.
Michael,
If it doesnt happen in America, it doesn't really happen. Haven't you heard? Thats been our thinking for the better part of 50 years... and it's a sad statement at this point. It will cost us.
But as investors we can take advantage of it.
Most people here including our legislators and Fed officials have no idea what is going on in the rest of the world - they continue to live in 1960s thinking. You know, when the US slows , every crane in Dubai, China, India, Russia, and Brazil stops.
http://tinyurl.com/4k6nut
China is planning to open 800 coal mines in the years ahead. Mull that.
They need 2 billion barrels of petrol just to build the ROADS they want. Thats not talking about the cars going ON the roads. Just the ROADS themselves.
And people blame the price spikes on speculators or "weak dollar".
Again, those who have a more comprehensive global view I believe with mint money taking advantage of those who will sell with their ethnocentric US view. US is 5% of world population. There is a whole globe out there - the quicker people figure it out, the more money they will make (in the long run). In the short run the market is controlled by people who live in the 1960s.
Mark,
In some earlier posts you said "damn day job". If you are a fulltime employee, how are you able to trade or manage the site so efficiently and regularly?
#1 I sit at a computer all day
#2 Any of the none trading (or I should say many) I write in the evening or very early in the morning and just post them during the day
#3 I type fast
#4 I usually don't post until 10 AM and then you will see a flurry of posts all within short time spans
I don't eat lunch, I stay late, etc.
I should also add re: trades
I constantly miss trades or don't have the best entries or exits
Obviously I cannot watch the market all day. So if something is there when I'm watching, I'll do it. Otherwise I miss it.
I'm not a daytrader so I don't watch the market all day nor could I. Nor is that my style. But I miss good opportunities constantly since I don't like to set limit orders that the MMs will take advantage of when I'm away. So unless something is there right when I'm watching I miss it. I usually end up paying 2-3% extra or missing out on 2-3% along the way due to that penalty.
But I'm still beating 1800 other mutual funds in my category.
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