An Unfortunate Turn of Phrase: Take It with a Lump of Coal

Barron’s Online ran Friday with a piece on James River Coal (JRCC), swallowing uncontested a Street Cuckoo’s sweet chirping about a couple of familiar names with picks in that seam.

“[SAC Capital Advisors have] become decidedly more convicted with their stake now,” Slava says. “They may be reloading, getting ready for another jump in commodities”...

...“Jim Simons’ Renaissance Technologies, another large shareholder, has also continued to buy, so it’s bullish for the company to have these two hedge funds staying convicted.”

Convicted? According to court records, they weren’t even indicted. And here’s a news flash for Slava and the other Edgar Robot drivers — James Altucher, lookin’ atcha! — braying about the positions of Hall of Fame hedge funds in various stocks.

It needs to be remembered that their devotion to JRCC, to pick a random example, is often (and more often than not in the case of the two names mentioned) inspired by large quantities of data doing high-speed forward triple-somersaults with half-piked twists inside a massive array of Intel’s fastest. Nothing wrong with that, but as anybody holding some of that $700-plus CME knows, momentum begets momentum. Until the acrid stench of reality wafts into the room, and good luck with getting a parole board hearing on restitution of the latecomers’ chips.

Money-losing coal companies ($3.45 a share, according to the not always reliable Yahoo! Finance), which have multiplied their stock price by almost 12 in the last year, even after a 30 per cent...ahem...adjustment over the last two months, define momentum.

Fund Fired Up for James River Coal
by Teresa Rivas
Barron’s Aug. 22 2008

Disclosure: Short Piggyback Artistes.

Comments

[redfog:]

Greg - Nice post. JRCC has yet to prove it can turn a profit given its excessive debt, diluted shares, and old old old equipment coupled with the high cost of diesel to erode its margins. CEO Socha will spin for another quarter while those low-cost coal contracts run on and on.

The only reason JRCC went up: It's the only U.S. coal company without a P/E ratio and the hedgies used that to manipulate the share price into stupid territory. Do your homework.

2008 Aug 26 07:16 PM

[Jim Bo:]

I am interested in reading, but I resent having my time waisted with cute writing!

2008 Aug 26 07:47 PM