Seeking Alpha

Coal companies continue to flounder, and Cowen analysts think the met coal sector may not see...

Coal companies continue to flounder, and Cowen analysts think the met coal sector may not see improvement with no near-term positive catalysts on the horizon. Australia's rainy season has left met coal production relatively unscathed, and China's high inventories and weakening steel prices could pressure pricing. Among coals, the firm favors Walter Energy (WLT) for the long term.
Comments (31)
  • J 457
    , contributor
    Comments (951) | Send Message
     
    Bottom is in. Coal will be one of the best sectors of 2013. So will NG. Rotation out of consumer/retail and into materials.
    15 Mar 2013, 04:43 PM Reply Like
  • lumpofcoal
    , contributor
    Comments (53) | Send Message
     
    pretty much agree.
    15 Mar 2013, 05:30 PM Reply Like
  • Brett22
    , contributor
    Comments (83) | Send Message
     
    I agree with you and WLT is one of the best ways to play the sector. With many stocks at 3 and 5 year highs, buying WLT will give some much needed Beta with lots of upside (if you can stomach the volatility). I look at these stocks like the bank stocks a year ago; look at BAC and Citibank once the turnaround started; tough to buy in when the up move starts so best to take the position on the beaten down coal stocks today, plug your nose and wait for what will be a good move eventually.

     

    One benefit of WLT is that it is frequently discussed as a cheap takeout target. While VALE and BHP are doing more divesting rather than acquiring lately, there are other acquirers who would like WLT at prices up to $55.
    15 Mar 2013, 04:55 PM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    Editor The Lewis Letter, and let us not forget Peabody Energy, the largest miner on the planet and making money versus the rest of the sector near bankruptcy. Market cap of $5B is petty cash to most activists, BTU sells at a thord of real asset value. A better deal than WLT.
    15 Mar 2013, 05:00 PM Reply Like
  • lumpofcoal
    , contributor
    Comments (53) | Send Message
     
    How about UP TO $75. per share from the new leader @ BHP?
    15 Mar 2013, 05:30 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    WLT has more upside and growth. Walter has unique assets which is why it sells at a premium
    15 Mar 2013, 07:04 PM Reply Like
  • Brandond
    , contributor
    Comments (354) | Send Message
     
    WLT would be a rounding error on a take out by one of the big miners and their met coal is about as good as there is in the business. Once the activists at Audley ramp things up, I predict we'll see more talk of an acquisition later in 2013. WLT is a good place to be speculative capital, especially at these prices.

     

    Agree with Lumpofcoal, takeout would be around $70/share.
    16 Mar 2013, 08:50 AM Reply Like
  • papayamon
    , contributor
    Comments (1127) | Send Message
     
    i'm in wlt at 37, planning to do what i always do when i'm upside down... buy another batch of shares and sell the call to cover further downside. if it doesn't go down but bounces and i lose the shares, i dropped by basis in the original shares by whatever i made on the call.

     

    eventually there will be a bounce.. i just did this with ultra petroluem, bought at 20 ish, worked my price down to 18, was upside down several thousand, but now out and i made a fewf thousand $$. - all in a 90 day period.

     

    don't know how fast wlt will be taken out, but 70 bucks would be phenomenal :). got 800 shares of wlt, getting ready to buy 800 more.
    16 Mar 2013, 09:30 AM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    One could own BTU for under $70, worth more than WLT which loses money like the rest of the sector except Peabody.
    16 Mar 2013, 11:46 AM Reply Like
  • Brett22
    , contributor
    Comments (83) | Send Message
     
    I don't know what numbers you are looking at when you make these inaccurate statements but according to each company's audited financials for 12/31/12, their profitability is almost identical. On sales of $2.4B Walter had a net loss of ($1.1B) which included a non-cash impairment charge of $1.1B. So after adjusting for the impairment loss, Walter was essentially breakeven on its $2.4B of revenue in one of the worst macro environments ever.

     

    BTU had $7B of revenue yet had a net loss of ($600M) which included a $900M impairment charge. So after adjusting for the impairment loss, BTU made $300,000 on its $7 BILLION of revenue.

     

    WLT does not lose more than BTU. The other downside to BTU is that, even at these current prices, BTU has a market cap of $6 Billion. So an acquirer would need to be paying over $9 BILLION to make a BTU acquisition happen. WLT on the other hand has a market cap of under $2 billion so a deal could likely be made at $4 billion. Look at all the heads that have rolled in the mining space due to bad, large acquisitions in the past. These guys are going to acquire small, bolt on companies and not larger, more leveraged play like BTU.
    16 Mar 2013, 12:29 PM Reply Like
  • lumpofcoal
    , contributor
    Comments (53) | Send Message
     
    Totally agree........the numbers show BTU is losing just like all the others in this boat.
    Better times are just ahead for WLT.
    Brazil needs to build infrastructure for the Games; China is looking up, Europe will buy steadily, the prices are getting better, costs are down, non-performing assets are being sold.
    17 Mar 2013, 11:44 AM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    Obviously if WLT broke even, BTU made its $300K as you write, then the conclusion of BTU making money is correct. According to the E-Trade reports, WLT lost over $14 a ahare for the last trailing 12 months. BTU lost over $1.85 same period and sells for $8 less a share. Where is the comparison?
    17 Mar 2013, 01:10 PM Reply Like
  • Brandond
    , contributor
    Comments (354) | Send Message
     
    Please everyone, ignore this guy. He has absolutely no idea what he is talking about.

     

    To make a statement that "BTU lost over $1.85 same period and sells for $8 less a share. Where is the comparison?". This implies that people should go buy BTU because it sells for less per share and defies the most basic rules of investing. (By the way, WLT has 62.5M shares outstanding while BTU has 269 Million shares outstanding) Price per share is meaningless. Under this logic, we should all rush out and buy Zynga at $3/share since it sells at $25/share less than facebook.

     

    Also, Brandon is correct with his numbers-I verified with the 10ks filed in the SEC's database. Sorry Ken but the SEC's database of COMPANY FILED documents is a little more reliable than whatever data your getting from Etrade. Call me crazy but when BTU's numbers are $300,000 of profit (after adjustment for impairments) on $7 BILLION of sales, I would call that essentially breakeven like Brandon stated.

     

    Ken, your initial statement was "One could own BTU for under $70, worth more than WLT which loses money like the rest of the sector except Peabody". Peabody had a NET LOSS of $600k in its most recent fiscal year so it did not make money like you say.

     

    These boards are meant to share opinions but when someone spews inaccuracies, I'm going to call them out. Again everyone, recognize Ken has no idea what he is saying. We should make buy decisions on companies based on comparing their share prices, really?
    17 Mar 2013, 02:26 PM Reply Like
  • Brett22
    , contributor
    Comments (83) | Send Message
     
    I almost could not believe what read that the lewisletter suggested we buy BTU instead of WLT "because BTU sells for $8 less". Reminds me of why I seldom rely on anything I read in these forums.

     

    Too much time already spent on this topic but I encourage folks who like Ken Lewis' advice to go buy BTU. I'll take the best pure met coal play WLT.
    17 Mar 2013, 03:12 PM Reply Like
  • papayamon
    , contributor
    Comments (1127) | Send Message
     
    why is this an either or? i own both. coal is beaten through the floor but there will be some recovery at some point. a little good news from china and we'll get a good pop on coal.

     

    as far as buying newsletters, they're just opinions and i can read plenty of them here for free. anyone who really knows the future wouldn't be trying to sell a newsletter. they'd simply be reaping millions trading stocks.
    17 Mar 2013, 03:26 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    geez chuck if this is what you base your investing ideas on, you should stop investing immediately or someone will take advantage of you
    17 Mar 2013, 03:31 PM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    Proof is established as portfolio was up 11% including dividends for 2012. Only dividend payers allowed, low PE's, none that lose money.
    Your love for WLT I hope works for you. Still believe BTU is the asset play with strong Australian base "dowin the water way" from China, India, Japan. And id a copy made a dollar, let alone $300K, they surely did not lose. Back to Math 101.
    19 Mar 2013, 12:25 PM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    a guaranteed loss, Why not own the largest, richest, coal company on the planet instead of seconds. The fact that BTU sells for less is one reason of ten to own it. Assets, mine locations, financials vs, WLT a minor miner compared to number one. My rep is 53 years young. You do not even have my name right let alone the right stock selection. Good luck on your pick,
    19 Mar 2013, 04:16 PM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    your picking minors for thin arguments. The assets of BTU are far greater than WLT. Their financials are stronger, losses less if we count that $300K is a break even number (which it is not), I would be careful of accusing one who "spews inaccuracies" when your own writings are inconsistent and arbitrary. If one writes an opinion you disagree with save the insults, they are classless.
    19 Mar 2013, 04:22 PM Reply Like
  • chuck lewis
    , contributor
    Comments (353) | Send Message
     
    Maybe you doomsayers should really look at the numbers of WLT and BTU before you return to Math 101: over the last 12 WLT lost $922,720,000. BTU,same period lost $497,550,000. Both are last 12 trailing months, Is your wizardry advising to go with the larger loser?
    19 Mar 2013, 06:28 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    your overall portfolio is irrelevant with WLT and BTU, what about beta? BTU this info is already factored in your looking for what the market hasnt priced in
    20 Mar 2013, 10:22 PM Reply Like
  • Brett22
    , contributor
    Comments (83) | Send Message
     
    I should also note that from a very good friend that does a lot of M&A in the space, his thesis is as follows. The Obama administration wants to kill all coal companies and their US operations (this is not new news). However, met coal is needed for iron manufacture and the met coal companies cannot be killed off and will eventually come back. Thus, trying to play for a comeback with coal companies that rely on thermal coal is a fool's bet. Because of this and the fact that most of WLT's production is high quality met coal, WLT is a favorite of most wall street analysts that cover the sector, even though WLT is unloved by many.
    16 Mar 2013, 12:53 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    I have to agree with everything you said except that thermal coal can come back as yoy coal consumption in China, India, Japan and Europe is expected to increase in 2013.
    16 Mar 2013, 11:01 PM Reply Like
  • papayamon
    , contributor
    Comments (1127) | Send Message
     
    have to agree that wlt is by far the more likely takeover candidate. i truly doubt that wlt could defend a $50 takeover offer. time tells all tales.
    16 Mar 2013, 12:58 PM Reply Like
  • eagle1003
    , contributor
    Comments (1507) | Send Message
     
    All this talk about takeovers! Who might be interested in buying coal assets and the bigger question is who has the extra cash available?
    17 Mar 2013, 11:45 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    these companies have so much excess cash available, companies have been hoarding cash for the last 5yrs.... productivity has gone up shows they've been holding on hiring and with rates so cheap, this is the time to put that excess cash to work...... why is it that companies are making takeover bids over $200billioin just this year alone..... this will ignite the economy well over $1 trillion in deals.
    18 Mar 2013, 01:56 AM Reply Like
  • eagle1003
    , contributor
    Comments (1507) | Send Message
     
    wi3714: If you think that coal companies have excess cash available to finance takeovers, think again. None of them are in great financial shape.
    18 Mar 2013, 01:25 PM Reply Like
  • Brandond
    , contributor
    Comments (354) | Send Message
     
    You are correct, the coal miners don't have excess cash. However, integrated plays like VALE, BHP, Glencore/Estrata have plenty of excess cash and they also have access to cheap debt that can be had for less than 5% on 15 year paper.
    18 Mar 2013, 01:30 PM Reply Like
  • wil3714
    , contributor
    Comments (1783) | Send Message
     
    dont put works in my mouth, I never said coal companies..... capital is cheap, companies hoarding cash now can put that to work especially companies with slowing growth
    18 Mar 2013, 05:55 PM Reply Like
  • lumpofcoal
    , contributor
    Comments (53) | Send Message
     
    GOVERNMENTS.
    17 Mar 2013, 11:49 PM Reply Like
  • nemonemo
    , contributor
    Comments (316) | Send Message
     
    WLT is good. Kidding me. Filing BK by 2014.
    14 Jun 2013, 07:02 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|