Shares of James River Coal Company (JRCC) fell sharply on Tuesday following a credit rating downgrade from S&P.
Highlights From The Downgrade
- S&P downgraded JRCC to a triple C+ from B-
- Outlook remains negative
- Warm winter and weak natural gas prices have hurt business
- Slowing coal demand from China
The entire coal sector came under pressure on Tuesday. Patriot Coal (PCX), Alpha Natural Resources (ANR), Peabody Energy (BTU), and Arch Coal (ACI) all hit new 52 week lows.
While JRCC is down more than its peers on Tuesday, JRCC has not yet reached a new 52 week low. The current 52 week low for JRCC stands at $1.90.
While the fundamentals are weak, it is dangerous to bet against JRCC because the short interest is currently 50%. If any positive news comes out about the company, shares will likely make a sharp move higher.
My view on JRCC remains unchanged from my previous commentary. I would be a seller of JRCC despite Tuesday's weakness. Investors looking to bottom fish in the coal sector should consider higher quality names such as Peabody Energy or CONSOL Energy (NYSE:CNX).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.