Bookkeeping: Trading Position in James River Coal (JRCC)
I am adding a new coal name here but unlike the others this one will (I think) only be a shorter term trade: James River Coal (JRCC) has dropped from $60 to $41 in 2 sessions, or about a 32% loss for people buying 2 days ago. This is a much more speculative smaller cap coal name unlike the type I hold in the fund for "investments". It is unprofitable this year but should show a massive amount of profits next year as it is very unhedged in its pricing for 2009. At a $1 Billion market cap it is also a buyout candidate. Maybe I am convincing myself to keep it longer, as I type this :)
One complaint I had with the hot sectors like coal is the stock prices were nowhere near any support. Well, within 36 hours some of these have gone from nowhere near support all the way to the 50 day moving average. Now that's a correction.
For now I began with a 1.8% stake with purchase in the mid $41s.
Long James River Coal in fund and personal account
4 comments:
Boy you are picking these are with great timing. I love it. I should've sold some a few days ago, but I was away from the market and yesterday the huge drop in coal stocks hit me pretty bad. I guess you can't be away from this market even for a few days. :)
Sheng, can't tell if its good timing yet. I am just learning from the past 4 corrections. Each one has similar patterns now so I am doing better on each iteration. i.e. in the past I'd be buying way too soon (and maybe I made same mistake today) but I was "all in" about 4-5 days too early and hence the fund got hammered. So I am working on remaining more patience and trying to see the white of their eyes if you will.
January was the one outlier because it simply went straight down in vicious action but that sort of thing you cannot model - I was caught 100% long about 2 weeks too early and we had two awful weeks we've been spending the whole year recovering from. That said, the stocks I bought were the "right ones" and recovered and gave us nice gains. If I had been in there buying the "bargain" financials or retailers it would of been a disaster.
So as long as you buy the right stocks, in time, you will be rewarded. I am just about out of cash now, so I need the PPT to come through for us and give us a nice 5%ish rally here. Go team.
I came across your articles a month a go and have been enjoying them since then on your excellent commentary and insights. I got burned on Wednesday on ICO, another coal stock because I chickened out when it is down 20% and another 10% early Thursday morning which I shouldn't have sold(up at the end of the day). I wished I have a bigger balls to stomach that. On a brighter note, your bullish comment on Coal will get me back in the game next week or two. What's your thought on Mechel if you have any? It has been down since the day I bought it ard $51ish. Thanks Mark and good luck in your future hedge fund.
Thank you Orange,
It is certainly difficult to hold a stock through a 30% drop. But I always advise as a general rule to layer in and out of positions. That way you never catch the top or bottom. Now you might leave some on the table or miss out on some moves but you also don't get destroyed when stocks inevitably pull back. I was early calling for a coal correction and left a lot on the table. But I also was not exposed much as they began to implode.
As for MTL it's one of my favorites for the long run. I have no idea what it will do this week, or next week, or in 4 weeks or 4 months. I believe it will be a big winner in the long run. Technically I was hoping for a pullback to $40 Thursday but it was actually one of the stronger ones. I think in a 12 month time frame any purchases in the 40s+ will seem like a solid purchase. We'd want to see it break over $50 again for a technical breakout.
Again going back to coal - they can fall back another 25% from here. I have no idea. If they do I will load up since the long term does not change. Only the day to day stock price. So just because I am layering in should not make you confidant they cannot be punished more. It all depends on where hedge funds want to put their money that day, week, or month. Just stick to solid companies with solid long term metrics and you'll make out in the end.
Post a Comment