Shares of James River Coal Company (JRCC) fell sharply on Tuesday following a credit rating downgrade from S&P.
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JRCC data by YCharts.
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
Sector Sell-Off
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.
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JRCC data by YCharts.
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.
Short Interest
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 Take
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 (CNX).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
