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Thermal coal prices fall to a two-year low as surging exports from Indonesia, the world’s...

Thermal coal prices fall to a two-year low as surging exports from Indonesia, the world’s largest coal producer, and the U.S. continue to overwhelm demand from Asia. The slide hits the share price of thermal coal miners (KOL -1.5%), with the valuation of some approaching their lowest in more a decade: ACI -2.1%, ANR -7.5%, BTU -4%, PCX -11.7%, JRCC -6.8%.
Comments (9)
  • Windsun33
    , contributor
    Comments (4254) | Send Message
     
    Even at 90% down, I don't see (PCX) as a buy. BTU and ACI look a lot better, but coal sentiment is still in the pits.
    11 Jun 2012, 03:12 PM Reply Like
  • gfroth
    , contributor
    Comments (3) | Send Message
     
    BTU and ACI are excellent values
    11 Jun 2012, 03:20 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    You know what they say about catching falling knifes...
    11 Jun 2012, 03:32 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Sell some puts on some of these coal equities and potentially get in at even lower prices.
    11 Jun 2012, 06:28 PM Reply Like
  • sethmcs
    , contributor
    Comments (3080) | Send Message
     
    Sold BTU Jul 20 @ $1.03 meaning that either I get the premium or BTU @ $19.00 which is a win win. In order to get that price on a option $4.00 out of the money there is shear terror in the market for these stocks. Keep in mind getting BTU @ $19.00 is below the 2009 low and the stock is extremely oversold. I for one do not believe that coal demand will collapse nor do I believe BTU will not emerge even stronger in the next up turn. Market to market accounting for the reserves at low prices is responsible but a very foolish view in my opinion.
    11 Jun 2012, 10:10 PM Reply Like
  • jcagara
    , contributor
    Comments (10) | Send Message
     
    Selling puts on some of the stronger coal companies is an excellent way to start initiating a position in the sector PROVIDED the following conditions are met:
    - one has confidence in the company that they are selling puts on - meaning it is very unlikely that the co will go insolvent
    - sell a small initial position - for example, if one has intention to establish a 2000 share position in BTU, initially sell 3 or 5 puts only and then watch the market and sector
    - sell that initial position at strikes where one would not mind being assigned the shares - we all have seen countless articles and opinions on how BTU, ANR, ACI etc are great values at prices much higher than they are now - yet they continue to go down - bottom line is that no one really knows how low the coal stocks can go and how long they can stay there - therefore make sure your strategy accounts for that uncertainty
    - follow the sector and individual coal stocks very closely and watch for the market to confirm a bottom and the start of a turnaround - once that moment arrives start deploying the rest of your capital in stages - there are lots of options here - one can continue selling puts but now at-the-money or even slightly ITM to take advantage of the upside. My favourite strategy though for that situation though when the coal sector starts turning around would be to start buying ATM LEAP calls to take full advantage of the upside - which very likely will sharp and violent.

     

    At this particular moment though I don't see any significant catalyst to cause the coal prices to start turning around and take the related equities with them. But then what do I know .....
    Maybe something will happen - very hot summer, bulish developments in China - who knows....
    Therefore, my strategy has to account for that uncertainty and take into account the possibilities that the coal stocks can go even lower.
    12 Jun 2012, 09:37 AM Reply Like
  • papayamon
    , contributor
    Comments (1064) | Send Message
     
    the only strategy i have left is to sell calls. i am in 2000 shares of ANR with a cost of around 9.50 after selling july calls. the earlier calls calls i sold fell so far i bought them back and then sold other calls. my hope is that things just stabilize and the shares hold around $8.00 till things pick up again - so at least i can sell calls for a few months to lower my cost enough that i can get out if there's even a small bounce. i am not trying to make any money with ANR... just trying to avoid a big loss.

     

    it's heck when you're reduced to hoping to avoid a loss as an investment strategy. i wish like heck i'd bought another 2k of Freeport McMoran and avoided the coal sector altogether.

     

    my prediction is ANR at less than $6 a share by the end of the year. it's worse than bad. this, of course, is my own fault for thinking things had fallen to far that there would be stability at the $10 level. wrong!
    12 Jun 2012, 11:33 PM Reply Like
  • Brendan O'Boyle
    , contributor
    Comments (1035) | Send Message
     
    Coal stocks are incredibly cheap, but I just don't see them having much to offer for long term growth. NG is the future, coal is living in the past. If you can call the bottom you can certainly make money, but personally I don't buy stocks that way. There are many cheap stocks with far brighter future prospects.

     

    If I made a play at all here it would probably be on BTU bonds.
    16 Jun 2012, 10:42 AM Reply Like
  • Windsun33
    , contributor
    Comments (4254) | Send Message
     
    Don't be too sure - I have heard similar predictions in the past for most sectors.

     

    A lot of the NG euphoria right now is because it is ridiculously cheap - and that will not last forever. It may not even last for more than a few years or months. Right now supply is much greater than demand, but as usage increases that curve will change.
    19 Jun 2012, 02:38 PM Reply Like
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