Comments on Fund My Mutual Fund: Bookkeeping: Changing Coal Allocation - Peabody En...

Bill, when I wrote the piece we did not know how l...

2008-07-05T14:07:00.000-04:00

Bill, when I wrote the piece we did not know how long the spot pricing would remain in place but it looked like it would last for a while. Since then, it has pretty much just improved.

I also don't assume that customers will pay spot prices but get some discount on volume

As for PE ratio it is arbitrary and impossible to know. Why are some stocks growing at 40% getting 75-100x PE ratios and why are some stocks growing 80% getting 5-15 PE ratio

I try to be conservative on estimates and hope the company does even better so there is even more upside.

P/E ratio is a complete guess as companies move from cyclical to secular growth. The P/E ratio in the drilling space for example has surprised me on how low it is and remains.

Ironically enough the estimates were just upped an...

2008-07-05T10:46:00.000-04:00

Ironically enough the estimates were just upped another 4% to $9.60 something. I usually use a spreadsheet on like Excel when doing the numbers because that way when the market prices change for say met coal or something, you can just make the Small change and observe EPS changes.
(The spreadsheet works well for non secret box (non financial) stocks especially commodity ones like ANR, POE/MOS, or even Meena Polar. TSL and other solars work well, you just plug in ASP/cost/watt/poly/tax/interest expense, etc.)

I was wondering what your estimates were because they were from April, and since then met coal and steam coal prices have surged. Based on current prices with a little conservative bias I still get closer to $20 EPS and I am wondering what the heck I am doing wrong (or if I am right)

I think your article gave me the impression 09 EPS would be more towards $20 anyway.

"When you read these numbers, again keep in mind they are selling met coal at $85 this quarter... we are talking $200s (potentially breaching $300) into 2009.Outlook"

If they profit now from $85/ton coal that means their costs at most will be $85/ton for 09.

Then current met coal prices are closer to $300, but even if the only got $260/ton They bank $175/tonne in gross profit X 10 mil tons is 1.75 billion, after tax and interest, etc. I get at least $1bil net income, which is like $15 EPS but that is for met coal only (and being really conservative with price realization and costs). not even steam coal, which they have 5 mil unhedged for 09 I believe. And prices are on the rise. I'm not trying to pump, I am just wondering if there is a correct assumption that your estimates made in April which were much better than the analysts' at the time, can possibly need revision upward.

I remember your post in march on POT/MOS saying how POT would do more like $12EPS in 09 and $14 in 2010..while the analysts were at $7- 8EPS for 2009 ;)

You were good with the estimates, or at least better than analysts, but you were still off by A LOT, as POT should double $12EPS for 2009.

Since there's so much upside I guess that is why you used a higher 20 PE on stocks like POT and ANR, on your (low) EPS numbers, because they had plenty of upside. I thought that is how it usually works, when you use analysts estimates if they have big upside you give a large PE and if they have gone up so much, the PE contracts. ANR's estimates were rising just to catch up with current coal prices in april-june, I believe, so even if coal stopped increasing the estimates still need to be raised, now that coal is still increasing (except last week), the estimates are WAY too low I would think

As an aside FDG's forward PE a few sessions ago wa...

2008-07-04T18:29:00.000-04:00

As an aside FDG's forward PE a few sessions ago was 11.5. And thats the trust.

Bill when I wrote this piece the analysts who follow 6-8 companies full time as their job has a 09 estimate of 3.00s

My point was people were missing the forest for the trees - including the ones who are supposed to follow these companies 24/7 as their full time job. I'm a part time stock guy who follows 10 sectors and I was able to find a discrepancy.

The analysts now are at consensus of 9.29

Thats the whole point of the post. You can squabble on the exact numbers - I don't know what the exact number will be - I was giving a range and I believe my range will be hit. When I wrote the piece the analysts (who again are supposed to be experts on their specific universe) were nowhere near my estimates. Where the numbers end up exactly I don't know. I believe higher. Still.

I don't remember the calculation since I did it qu...

2008-07-04T18:24:00.000-04:00

I don't remember the calculation since I did it quite a few months ago.

FDG is a trust and hence gets a lower PE ratio

my EPS calculation is higher than yours but my PE ratio is higher - comparable to MEE, BTU, ACI, and peers. Not FDG which is not a peer.

Mark can you show how you get your numbers for ANR...

2008-07-04T17:41:00.000-04:00

Mark can you show how you get your numbers for ANR EPS?

According to what you said you would think they will do $10-$15 EPS for 2009.

I just am wondering because I am on a completely separate page. I am trying to be conservative and still get at least $20 EPS for 2009. Also remember they do have some (like 5 mil tons) unprice steam coal for 2009 still. I think.

Thank you.

I am just wondering because if you only think they will do a little more than 15 EPS in 2010. Then ANr wouldn't go much higher than 120..a 8 PE, I mean look at FDG it only gets a 6 PE. And 2010 would be closer to the peak EPS year for ANR.

I was thinking more like $20 EPS for 2009. and $25-$30 EPS for 2010. And give those a 7-8 PE and a $200 longer term target.

I won't ask what your screen name means ;)I try to...

2008-06-05T15:13:00.000-04:00

I won't ask what your screen name means ;)

I try to budget for the worst and hope for the best

my "worst" falls in between the current estimate and your number, but I am looking out to 2010 especially, where your number seems viable/beatable perhaps.

Hi TraderMark,This is my first comment on your blo...

2008-06-05T14:41:00.000-04:00

Hi TraderMark,

This is my first comment on your blog, and what a pleasure it is. You do an excellent job on picking stocks and explaining market psychology, must be all that cool-aid ;).

Anyways, I am 20 years old and just finished my junior year of college. I am also passionate about investing and cannot wait to start my career. After observing the market for a couple years, I have finally decided to tip my toes in.

I have seen the run-up of ANR in the last couple of months and believe that there is room for a double still. The one thing that really bugs me is that the 09 EPS estimates are increasing, however $6.89 (yahoo.com) still seams quite low. My estimates are more close to around $15 EPS for 09. Am I way to optimistic?

Thanks for your efforts.

Yours sincerely,
Vahagn

Hi serious, I am familiar with FDG too. I've owne...

2008-04-08T13:27:00.000-04:00

Hi serious,

I am familiar with FDG too. I've owned all these on and off over past 4-5 years. Much like natural gas some I have not looked at for maybe 2 years (like FDG or ANR up to about 3 weeks ago), but this resurgence had me take another deeper look at some sectors. I am pretty full up with coal at this moment; 4 of 50 names is approaching 10% of names in the portfolio. They generally trade together, at least directionally, so I think having 4 names pretty much gets me what I need. Thanks.

I found your ANR analysis interesting. I suggest ...

2008-04-08T12:44:00.000-04:00

I found your ANR analysis interesting. I suggest you should consider FDG( a Canadian trust listed on the TSX & NYSE which owns 60% of the Elk Valley mine.TCK, its largest shareholder owns the rest and operates the mine). I think it is the 2nd largest exporter of met coal.It has long life reserves and its share of production is around $13M tons per year. In addition it distributes almost all of its profits to its unit holders(qualified dividends). The latest quarterly distribution is $.50 but that was based on last year's coal prices of around $90. It enters into annual contracts which go into effect for orders placed after 4/1 so the new prices will only partially affect the current quarter's results. Starting in Q3 the distributions will sky rocket(multiple 13M times the increase in the new price(not yet announced but presumably somewhere between $50 and $100 more than last year's) and then divide by 150M(shares outstanding) and the new annualize distribution rate increase to somewhere between $6-$10. If you look at the chart's its performance has been very similar to ANR but in addition you