So far since April there has been no correlation between natural gas prices and coal stocks. As you note, nat gas is up 100% since that time, KOL is down almost 30%, JRCC down over 50%, ACI down 30%, ANR down 50% and BTU down about 10%. Actually, I guess that is not no correlation, that is a negative correlation. There is definitely intuitive appeal for the thesis but so far it has not played out. What will make it different this time around?
This Gold Mining Company Is The Best Bet In Nevada [View article]
Peter, I certainly agree that there is considerable value in the permits. Also in the existing mining infrastructure, as per their balance sheet. But with respect, I cannot see the value in Valor beyond its cash and the properties it just acquired from Pershing for $2.5 million. If there is more to it than that, fair enough, I have made a mistake. But I cannot see it from their filings. I don't mean to say you or anyone else here is wrong; I just have not been able to uncover that value myself.
This Gold Mining Company Is The Best Bet In Nevada [View article]
Peter, after reading your article I did some further research. The valuation is now troubling me. Deducting the cash from their market cap you get an EV of roughly $96 mil. Compare that to the NI 43-101 estimate of 248,000 oz of gold and you have the company trading at $387/oz of gold in the ground. The average exploration stage junior trades around $45/oz. The recent Galway takeover, which was at a large premium and thought to be quite expensive, was done at $200/oz.
Ramisle, thank you for your thoughtful reply. I need to re-emphasize my point to you that new building orders are down 54%, and that means reduced ships coming on stream going forward. And that I am not predicting a shortage of ships, but a potential re-balancing of supply and demand that could allow for a return of shipping rates that restore profitability, from the presently "dismal" rates that you have noted and we both agree upon. Should that come to pass, it could restore considerable value in many beaten down drybulk shipper stock prices. And that alone is the investment thesis. Time will tell if it plays out.
I intentionally did not delve into the company specific issues you point out of stock dilution, deferring debt principal, and reverse splits you mention. While that has happened to some companies in the sector it by no means applies to all and specifically does not apply to the two individual companies I have studied, BALT and DSX. My purpose was to provide readers with a general overview of certain current events in the sector and provide them with individual names they could investigate on their own. To further inform, I provided links to other SA authors who have written more in depth articles on individual companies for those wanting to go further. As stated in the first paragraph, the purpose for writing the article was to "review the macro evidence".
I was intrigued by your observation as to the seasonal rise in BDI in Oct/Nov followed by collapse in Jan. So I pulled up a chart of the BDI and found that in 2006 during Q4 the BDI did indeed rise but did not collapse during Q1 of 07 but continued to rise. But the BDI actually fell in each Q4 of 2007, 2008, 2009, 2010 and 2011. And in only half of those six Q1s did the BDI fall, the other half it rose.
Your comment did speak well to the risk inherent in the sector, and that is an aspect that deserves emphasis.
Mellanox On The Road To Technological Obsolescence [View article]
I think the author makes a strong case, but I am surprised that he does not inform his readers that they report earnings tomorrow (Oct 17) and shorting a momo stock like this in front of earnings has its own potentially high risk (or reward).
All sorts of NGLs and natural gas gets into the ground water. YouTube some of the movie clips of people in PA lighting their sink faucets on fire. New hydraulic frac'ing techniques have only recently opened up shale formations that were otherwise thought to be "trapped". When you frac a shale formation, it is a very big deal which can potentially be very disruptive to the formation. This process intentionally allows the "trapped" hydrocarbons to move. That is why we can now extract from shale. The issue is can these large multi-staged fracs be executed in a controlled fashion. Certainly there is strong evidence in Dimmock and other areas where the effects of the fracs were not controlled. The goal going forward should not be to put an outright ban on hydraulic multi-stage fracing, but to make sure the process is implemented so as to control the release of the hydrocarbons and re-capture the maximum amount of frac'ing fluid. This will preserve the local environments, continue employment and allow us an abundance of an inexpensive, clean fuel.
Amazon's Imminent Liquidity Crunch And Share Price Collapse [View article]
I think the author has presented a good fundamental analysis of AMZN and has handled some of the more caustic comments with style. With $2.6B of working capital and positive (though meager) free cash flow that covers capex, I don't really see the imminent liquidity issue. However, I do see the imminent valuation issue if growth expectations are not maintained in the Q3 earnings release and guidance. AMZN is wildly over-valued and looking for a reason to fall, IMHO. I think the author has capably outlined that potential reason in this article.
VIX ETN Hits All-Time Low, In Single Digits As Contango Deepens [View article]
I think that it is pretty much accepted investment canon that VXX is a short term trading vehicle because of contango issues. What the article fails to point out is that recently the contango has come in from $3 to 70 cents today. Contango is actually relatively modest right now.
Amazon: Great River, Bad Investment [View article]
An accurate, sensible article presented with logic and style. The thesis will no doubt someday prove correct, but the real question for investors is "how do I know when to get in?". For that answer, I think we need to leave the realm of the fundamental and enter the technical. AMZN is a classic "don't fight the tape" stock. While I agree with the author's points, it is not a short I want to be early on.
Why Last Week's Natural Gas Decline Was Only A Dip [View article]
This dip has taken gas down to the lowest point that I thought it might reach ($2.75 - $2.80). This has been nasty. The word "dip" might be guilty of under-statement....
Natural Gas Storage Glut Could Become A Deficit By October [View article]
In order for there to be a "deficit", gas in storage will need to fall below the lower band of the 5 year average. The 5 yr avg at the end of injection season is around 3687 bcf, and I would say a deficit would be 20% below this level, or 2949 bcf. Current gas in storage is 3189 bcf, so for there to be a deficit by the end of the Season, you would need net withdrawals from here on in. That would be pretty much unheard of. I can certainly see the surplus removed by November, in fact I wrote about that http://bit.ly/MorOGg But a deficit, no, not this year. It could happen in 2013, though.
Gold's performance over the past year (flat) actually isn't so bad given the dollar has risen 12%, according to JPMorgan's gold team. Still the group remains cautious on the metal and miners (especially amidst reporting season) as declining inflation rates suggest monetary stimulus isn't as forceful as commonly believed. [View news story]
Gold flat but miners down 30%. That much disconnect cannot last and is a buy opportunity. http://seekingalpha.co...
Buy Signal: Pessimism Among Gold Miners Hits Extreme [View article]
"You have to buy before a trend change because it is psychologically so difficult for everyone to do so. " I cannot argue that but I do not practice it either. Hands are too scarred from catching falling knives!
Wilbur Ross defies Dennis "never, ever, ever add to a losing position" Gartman, adding 700K to his roughly 29M share stake in Exco Resources (XCO) last month. The purchases were made at an average price of $6.78, while his initial stake was taken at as much as $14. Has Ross even heard of Gartman? [View news story]
I hate to come down the middle on this one, but they are both right. Gartman espouses a good trading (the key word) philosophy. Wilbur is a great long term investor. I happen to be with Wilbur on this one.
Which Coal Miner Is The Next To Bankruptcy Protection? [View article]
Low P/B and large short positions are not direct indicators of impending BK, but they certainly express a negative sentiment toward a company. In the grand scheme of things BK is a relatively rare event. To me, the indicators that I would have thought better predictors would be around cash flow (you did look at EBITDA) and around BK triggering events. Those triggering events are likely to be some sort of default: either of a loan covenant or a payment due. While JRCC is in bad shape operationally and has negative cash flow after capex requirements and is not financially very healthy, it does not strike me as an imminent BK candidate. It has plenty of liquidity and working cap to keep it from going offside of a covenant on its revolver; and the next debt principal repayments don't occur until 2015. JRCC's costs on its CAPP thermal coal are certainly worrisome, and may be good reason to avoid the stock. But I think BK risk is a different thing and does not appear to be on the horizon. A further reduction in CAPP prices for a sustained period would erode that liquidity and change that outlook. But for today, BK seems remote, even if a bright future also seems remote. While PCX also faced the same difficult industry prospects, it had negative working capital just before filing and negative OCF. I think BK is more about the end of liquidity, not just bad business environment.
For Coal, The Worst Is Behind [View article]
This Gold Mining Company Is The Best Bet In Nevada [View article]
This Gold Mining Company Is The Best Bet In Nevada [View article]
Shipping Stocks: Sink Or Swim? [View article]
I intentionally did not delve into the company specific issues you point out of stock dilution, deferring debt principal, and reverse splits you mention. While that has happened to some companies in the sector it by no means applies to all and specifically does not apply to the two individual companies I have studied, BALT and DSX. My purpose was to provide readers with a general overview of certain current events in the sector and provide them with individual names they could investigate on their own. To further inform, I provided links to other SA authors who have written more in depth articles on individual companies for those wanting to go further. As stated in the first paragraph, the purpose for writing the article was to "review the macro evidence".
I was intrigued by your observation as to the seasonal rise in BDI in Oct/Nov followed by collapse in Jan. So I pulled up a chart of the BDI and found that in 2006 during Q4 the BDI did indeed rise but did not collapse during Q1 of 07 but continued to rise. But the BDI actually fell in each Q4 of 2007, 2008, 2009, 2010 and 2011. And in only half of those six Q1s did the BDI fall, the other half it rose.
Your comment did speak well to the risk inherent in the sector, and that is an aspect that deserves emphasis.
Mellanox On The Road To Technological Obsolescence [View article]
What If They Come After Fracking? [View article]
Amazon's Imminent Liquidity Crunch And Share Price Collapse [View article]
VIX ETN Hits All-Time Low, In Single Digits As Contango Deepens [View article]
Amazon: Great River, Bad Investment [View article]
Why Last Week's Natural Gas Decline Was Only A Dip [View article]
Natural Gas Storage Glut Could Become A Deficit By October [View article]
Gold's performance over the past year (flat) actually isn't so bad given the dollar has risen 12%, according to JPMorgan's gold team. Still the group remains cautious on the metal and miners (especially amidst reporting season) as declining inflation rates suggest monetary stimulus isn't as forceful as commonly believed. [View news story]
Buy Signal: Pessimism Among Gold Miners Hits Extreme [View article]
Wilbur Ross defies Dennis "never, ever, ever add to a losing position" Gartman, adding 700K to his roughly 29M share stake in Exco Resources (XCO) last month. The purchases were made at an average price of $6.78, while his initial stake was taken at as much as $14. Has Ross even heard of Gartman? [View news story]
Which Coal Miner Is The Next To Bankruptcy Protection? [View article]