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DanielHolzman

DanielHolzman
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  • Coal: A Long-Term Bull Market, Fueled By Supply And Demand [View article]
    Interesting article with an interesting viewpoint. The EIA data clearly indicates that the price of coal has increased over the past five years or so, at the same time that the coal mining stocks have been severely hammered. On it's face, this makes little sense. Perhaps some of the coal mining companies are locked into long term supply agreements that prevent them from benefiting from higher prices? It seems unlikely that the cost of mining has increased over the past five years, presumably wage increases are a thing of the past, there is more automation, and the price of diesel fuel has dropped. So to what does the author attribute the massive loss of market value sustained by virtually all the coal companies? Surely a relatively small loss of market share in the generation of electricity cannot account for the massive stock price losses, especially given the author's observation that the price per ton has gone up. Something is missing here.
    Jul 2, 2015. 02:22 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: Good News, And Nobody Cares? [View article]
    The author states repeatedly that the sale of assets is good news, and expresses disbelief that the stock price retreats in the face of good news. However, the author does not explain why he believes that this particular sale of assets is good for the company. Presumably if the assets were sold for more than fair value, that would be good, similar perhaps to getting $20,000 in the sale of a used car worth $15,000. But if the assets were sold for less than fair value, that would suggest a fire sale, and would not necessarily be good news for the company.

    Perhaps the market is (correctly) interpreting this sale as evidence of a failed business model?
    Jul 2, 2015. 07:10 AM | 6 Likes Like |Link to Comment
  • The Beauty Of Diversity [View article]
    I am somewhat confused by your article. Are you suggesting that the portfolio should be tailored to current economic conditions? Or are you suggesting that the portfolio should have roughly equal amounts of the different assets you mentioned (stocks, bonds, gold, cash) at all times?

    If the goal is simply not to lose money, which I think you said it was, why not put all your money into T bills? Maybe I missed the point of your article completely, but holding roughly equal amounts of the four assets you discussed in no way shields you from a marketwide downturn that drags everything (except cash and T bills) with it.
    Jun 24, 2015. 08:07 PM | 3 Likes Like |Link to Comment
  • Why Cameco's Recent Drop Looks Like A Buying Opportunity [View article]
    "All in all, it looks like Cameco will continue getting better going forward."

    That sentence is the heart of this article. Unfortunately Cameco has been a dog of a stock for several years, so I don't really understand the "continue getting better" part. Most of us who follow the uranium space understand that long term, Cameco and the other miners have a reasonable business model. However, the operative word is "long term".

    In the next year, I see little reason to anticipate a rebound in uranium pricing. There is ample supply, several mines could be restarted relatively quickly if pricing improves rapidly, and there is a fair amount of U.S. and Russian government uranium from the weapons programs that is still being sold into the market. Hopes for rapid restart of the Japanese reactors faded a while ago, and even if they restart soon, Japan continued to purchase uranium fuel during the shutdowns, so they have ample supply for at least a few years.

    Certainly China and India will continue to build reactors, and somewhere in the five to ten year range, will require fuel. They may elect to lock in fuel supplies early, but this will be on long term contract, which is not the same as spot pricing. The author needs to carefully distinguish long term pricing from spot pricing, and analyze the profitability of a company like Cameco based on their business model, which is to sell the majority of their uranium on long term contract, with only a minor amount reserved for the spot market.

    Conclusion: In the long run, uranium is likely to pick up in pricing, but this is at least three years out in my opinion. Purchasing Cameco now based on the hope that the stock price will rise in three years seems premature and unnecessary. With the tax issue hanging over Cameco like the sword of Damocles, now is a very aggressive (possibly foolish) time to be long Cameco.
    Jun 24, 2015. 05:13 PM | 8 Likes Like |Link to Comment
  • Natural Gas: Lackluster Hydroelectric And Nuclear Generation Will Drive Gas Demand And Prices Higher This Summer [View article]
    I want to thank the author for a very interesting article with a unique approach to forecasting NG prices. One thing I am a bit puzzled about. Let us assume that the author is correct, and natural gas prices rebound due to weak hydroelectric production, and reduced nuclear output due to outages. Is UNG really the best way to play a rebound in prices? Others on SA have pointed out that due to roll decay and contango issues, UNG often does a poor job of matching NG pricing. Perhaps a better way to play an increase in NG pricing would be purchase of a large NG producer, maybe Chesapeake? I personally have dabbled in UNG, but only on a short term basis, and usually as on option play. I am not sure it works very well as a long term play on higher gas prices.
    Jun 22, 2015. 08:04 PM | 3 Likes Like |Link to Comment
  • Why Plug Power's Weak Stock Performance Is An Opportunity [View article]
    PLUG reminds me of the old joke about the two brothers who go into the egg selling business. They buy eggs for a dime in upstate New York, truck them down to New York City, and sell them for a nickel. After a few months, one of them notices the business is not doing so well. The other suggests they need to buy a bigger truck. So with PLUG, they can't seem to make money on each fuel cell system they sell, so their business model is to sell more fuel cells?

    Fuel cells have been around since the early 1800's. It is misleading to assume that major technological improvements are just around the corner, and somehow PLUG is going to be the beneficiary of a microelectronic type of revolution. I don't see it. Fuel cells are fascinating pieces of machinery, they have a niche in the market, but PLUG has not demonstrated the ability to cash in on their position. Why is anything going to change in the investable horizon?
    Jun 22, 2015. 08:17 AM | Likes Like |Link to Comment
  • Why Plug Power's Weak Stock Performance Is An Opportunity [View article]
    The author makes efficiency claims about fuel cells which are not substantiated by independent sources. Perhaps the author does not understand the fundamental physics behind fuel cells.

    The maximum theoretical efficiency of a fuel cell is reported to be 83% (see http://bit.ly/1FtOXjr). In practice, most fuel cells operate at around 40 or 50 percent efficiency. In terms of overall efficiency, it is CRITICAL to understand that the hydrogen used by the vast majority of fuel cells is generated by reforming methane (natural gas) at an efficiency of around 71% (see http://inside.mines.edu~jjechura/EnergyTech/0... depending on the specific process used, and the degree of purity required.

    So the overall efficiency of the fuel cell is around 36%, which is certainly not bad, but nowhere near the figure quoted by the author. A combined cycle natural gas turbine can achieve around 54% fuel efficiency (Higher Heat Value), see http://bit.ly/1FtOXjt, so it is unlikely that fuel cells are going to displace natural gas combined cycle plants any time soon.

    Certainly there is a place in the energy world for fuel cells, particularly in hazardous environments like warehouses, or in areas where hydrogen is cheap for microeconomic reasons, but the breathless enthusiasm of the author for this particular stock, based on misunderstanding of thermodynamic efficiency, appears to be misguided.
    Jun 20, 2015. 08:00 PM | 4 Likes Like |Link to Comment
  • Time To Consider Ford Is Now: Real Gains On The Way [View article]
    "The company's sales of America's most popular vehicle have fallen so far this year, but this is not due to a lack of demand."

    If the poor sales are not due to lack of demand, what does the author believe the reason is? The author claims that lack of product is holding back purchase, but he offers little evidence to support this thesis. Does the author believe that a prospective purchaser walks into the showroom, determines that there are no actual models for sale (due to ramp up issues), and then goes out to purchase a Chevy or Dodge? If that is the thesis, then there would be no pent up demand. If the buyer walks into the showroom, finds no models for sale, but likes the truck, they might wait until later in the year to purchase. I am unclear how the author has determined that there is or will be "pent up demand" later in the year. If the F-150 does not sell well, that would seem to be a real problem for F, as it is their flagship product.
    Jun 18, 2015. 03:29 PM | 1 Like Like |Link to Comment
  • Is Valero Energy A Buy At Current Price Levels? [View article]
    "Valero's margins will remain higher than the levels of the same period last year - this expansion in margins should translate into further rise in the stock price."

    No doubt the author is aware that refiners earn their profit based on the formula Profit = Price of Product - Price of Crude - Cost to Refine. The crack spread is the difference between Valero's cost to produce a barrel of product and the price of product, whether that product be gasoline, jet fuel, diesel etc. So refiners only benefit from reduced crude prices IF AND ONLY IF the crack spread increases. For reasons that are unclear to me, the author does not discuss the crack spread, but appears to assume that the crack spread increases as the price of crude goes down.

    A brief discussion on the meaning of crack spread, and the factors influencing it, may be found here http://bit.ly/1KTwmo9. A more complete discussion on the complexities of crack spread and refinery economics may be found here http://bit.ly/1KTwmob.

    Note that both articles agree that crack spread IS NOT determined by crude oil price alone, there are many factors that influence it, and in any case crack spread is not a perfect predictor of refinery economics. I appreciate the author's effort at producing an article on a very complex subject, however it is important not to oversimplify the discussion by asserting that low oil prices will inevitably lead to higher profits for Valero, with the (in my opinion) faulty conclusion that Valero is necessarily undervalued at this time. While Valero may be a good investment, there is considerably more to the discussion than the price of WTI or Brent.
    Jun 15, 2015. 04:36 PM | 8 Likes Like |Link to Comment
  • The Ultimate 'Get Paid While You Wait' Investment Strategy For The Turnaround In The Coal Industry [View article]
    "It appears to us that the company is committed to using less draconian measures to survive, which is good news for both stockholders and bondholders."

    I want to thank the author for a fascinating idea on a company in clearly difficult circumstances. I never really considered buying debt in a company near bankruptcy, it certainly is an interesting way to play a potential recovery in coal pricing.

    It seems to me that the heart of the article is the sentence above. Consider that voluntary bankruptcy is at the discretion of the company, and certainly would solve a lot of their problems (debt, pension, liability for mine cleanup). So clearly prudent management would be looking hard at the option of voluntary filing, which would appear to be far better for Arch than involuntary bankruptcy, which would take control of the process completely out of their hands. So what possible reason does the author have for believing that Arch is committed to less draconian means of survival than voluntary bankruptcy?

    The author appears to suggest that their belief is pure speculation, which I suppose is appropriate for an article suggesting use of a highly speculative investment technique. Note I am not criticizing the author for presenting a speculative idea, just trying to judge what probability the author believes is appropriate that Arch will declare voluntary bankruptcy in the next few years, and why the author believes in that probability. The market has already expressed their belief in bankruptcy, in the form of a bond that trades at $0.16 on the dollar (equates to expectation of bankruptcy with zero bond recovery within two years).
    Jun 15, 2015. 02:49 PM | 1 Like Like |Link to Comment
  • Why I Sold Kinder Morgan, And Bought Airgas Instead [View article]
    Certainly an interesting article, and I appreciate the author's candid discussion. In terms of ARG, it is currently trading at a P/E of close to 21. This is pretty close to historical average, but perhaps a little high for an industrial company with significant competition. I understand you are focused on dividends, but there seems to be limited room for price appreciation, so if you are looking for total return, this may not be the best stock. Good luck with your investments.
    Jun 10, 2015. 11:31 AM | 2 Likes Like |Link to Comment
  • Why This 5.8%-Yielding REIT Is A Strong Buy [View article]
    "That means the stock trades for 12 times this year's adjusted FFO, which is an attractive valuation level."

    The author states this critical sentence as though it is either obvious, or generally accepted by the investment community. It is certainly not obvious to me that for this particular name, given it's issues with Manor, that 12 times adjusted FFO is an attractive valuation level. I have no idea what an attractive valuation level is, given the apparent risk of revenue reduction facing this company, but I would appreciate a detailed explanation of why the author believes the 12 times FFO represents good value at this time. Is it based on historical data? Projected data? Some sort of algorithmic analysis? A gut feeling? Comparison with other REITs with a similar business model? I do not understand how the author can recommend this particular REIT without a detailed discussion about the risks it is facing, and the prospect of future reduction in stock value.
    Jun 6, 2015. 06:09 PM | 4 Likes Like |Link to Comment
  • Turkmenistan - Significant Natural Gas Reserves [View article]
    I would like to thank the author for discussing an investment opportunity that few of us (myself included) know anything about. Unfortunately the only investment discussed, a Central Asia ETF, is such a broad based fund geographically and in terms of the stocks it holds, that its performance has little or nothing to do with the central thesis of the author's article, namely that Turkmenistan offers a superior investment environment due to the opportunity for growth of its natural gas export program.
    Jun 5, 2015. 03:07 PM | 2 Likes Like |Link to Comment
  • Why Crude Oil Will Continue To Rise [View article]
    "The cause of the oil price decline is the decreasing demand due to the recent slowdown in global economic growth and the U.S. being less reliant on oil due to fracking."

    Like many investors, the author appears to use the term "demand" to mean the same as consumption. That said, there has been no reduction in total worldwide petroleum consumption through 2013, the last year I can find reliable data. See
    http://1.usa.gov/1hYiz0p

    Perhaps the author means that the rate of increase in consumption has slowed down, and perhaps that is why he believes the price of oil has dropped significantly. Or perhaps the author means that the percentage of consumption relative to production has dropped (this is NOT THE SAME as a reduction in demand), leading to the reduction in price.

    If the EIA graphs are to be believed, what has happened is that consumption has continued to increase (as we would expect, more people, more middle class worldwide), but the production of oil has increased, leading to a price imbalance.
    Jun 1, 2015. 03:17 PM | 4 Likes Like |Link to Comment
  • Arch Coal Ready To Surprise [View article]
    I took the time to reread your September 2014 article. In that article, you expressed the opinion (correct as it turned out) that Arch would likely have several quarters of negative profit. You also expressed the opinion that Arch could turn things around, based on your observation that coal was used in metallurgy and cement manufacturing. In that regard, I believe you missed the mark.

    Arch has overwhelming problems with debt, as you have noted several times. It would make sense for Arch to consider voluntary bankruptcy, which would allow it to discharge much of its debt, and return as a (smaller), profitable company. Of course this would wipe out the value of shareholders, and probably most of the bondholders, but this is how capitalism works. Perhaps Arch should accept that it made a catastrophic blunder undertaking expansion based on debt, and start over. I am not sure why you emphasize the ability of Arch to turn around their finances, while downplaying the obvious solution of Chapter 11, reorganization, and emergence later.
    Jun 1, 2015. 03:01 PM | 3 Likes Like |Link to Comment
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