Just a quick bookkeeping note - I am selling some ANR into this spike @ $97 range simply because this market is putrid and hedge funds don't want coal or fertilizer. This is my favorite coal name and one day it should be back to a major stake in the fund - but until money flow returns to the sector I am selling spikes - down to a 1.9% stake. I have been tickled to death with the earnings reports from our portfolio thus far - our stocks are absolutely destroying estimates, pushing guidance up and making us very happy from a fundamental standpoint. But as I keep repeating, until the market cares (and I don't count these oversold spikes as real buying) I am selling spots of strength. When the next real move happens in these spaces they will be sustained multi-month moves. If we miss the first week or two of it, we'll live. Protect capital is job #1.
Back to Alpha Natural Resources who again I believe the story is just beginning [May 5: Alpha Natural Resources Booming Earnings - Just the Start]
- Coal mine operator Alpha Natural Resources Inc. on Tuesday reported record earnings on improved margins and increased metallurgical shipments. Alpha said profits for the second quarter increased to $74.3 million, or $1.04 per share, compared with $4.7 million, or 7 cents per share, in the year-ago quarter. The latest quarter included several special charges worth a combined 42 cents per share, and an income tax benefit of 16 cents per share.
- Revenue increased to $732.2 million from $435.3 million. (+68%)
- Analysts surveyed by Thomson Financial expected earnings of 53 cents per share on revenue of $571.4 billion.
- The company's coal margin per ton rose 130 percent in the quarter to a new high of $21.85.
- "Persistently strong demand for metallurgical coal from steel producers worldwide is having a profound impact on our financial performance," Michael Quillen, Alpha's chairman and chief executive, said in a statement. (I love these new words I am starting to see in the fertilizer and coal earnings reports - we had miserly and now we have profound)
- For 2009, the company expects net income of $1.0 billion to $1.3 billion and coal revenue of $3.7 billion to $4.4 billion.
When you really think about this earnings power - much like the fertilizer - it is reaching the point of humor that hedge funds are fleeing this group because "the world will be ending" and "crude oil might go to $100 or gasp $80". But that's the markets for you. We're just the gnat on the big money's behind.
Full report here which has a lot of detail I don't have time to break down in the blog. Synopsis: It's good. Very good. And just the start.
As I said, I hope Harbinger gets its way and forces Cleveland Cliffs (CLF) to break up this deal, because Alpha Natural Resources on its own is going to be a $200+ stock in 2009. [Jul 25: More Drama at the Cleveland Cliffs Corral] As I wrote - I thought $130 was complete thievery on the part of CLF but the hedge fund who controls nearly 1/5th of Cleveland Cliffs disagrees. How they think $130 is a bad deal is beyond me, but what do I know - they have an army of super computers and CFAs and MBAs. I'm just one dude trying to raise funds for a mutual fund.
Long Alpha Natural Resources, Cleveland Cliffs in fund; long Alpha Natural Resources in personal account
6 comments:
Hey Mark,
Look at at LCC,CAl... Jim Rogers also invests in airline. What is your thought?
Please show me a link that shows Rogers is buying airlines - I'd love to see that.
Airlines are being used as derivatives of oil. As oil goes down, people run to the airlines because instead of losing $2000 on every flight, they are now losing $900 on each flight.
They are making it up on volume.
http://seekingalpha.com/article/87322-china-jim-rogers-and-the-global-commodities-outlook
Thanks that is interesting.
Keep in mind Rogers usually buys with 5-10 year time frames not like hedge funds or out typical American obsession with short term returns.
Meaning, if his airline buys go down 30% in next 2 months he is ok, whereas hedge funds would hear about massive withdrawels and mutual fund investors would say "what a freaking idiot to buy airlines".
So as with everything it is about time frame. It really all depends on oil over next year or two - they will trade in opposite.
Singapore Airlines is one thing, or Emirates. Not so keen on US airlines other than for quick trades.
Mark - wanted to hear you thoughts on FDG buy-out
http://ap.google.com/article/ALeqM5gpOC5y10UVCaAM4xkFxCaMVp3Y5gD927L4M80
I don't follow FDG that much because its a trust, but it follows into my theme that many of these coal producers will not be independent in 24 months.
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