The BUT earnings repot was a good read. They paint a vey bullish picture for coal. Tons of new coal power plants coming online overseas. Nat gas too expensive except for here. Have to use coal. Its cycilcal.
Nat Gas is headed to $5 which is needed to get rig count up some. All the oversupply was burned off. ACI and BTU are at lows of year even though the nat gas fundamentals have reversed 100%. They are at same price or lwer than when Nat gas was $2's last summer and it looked hopeless. The time should be right for ACI BTU, possibly finally for WLT. I have to say though, it is mind boggling that every single name on the board took on billions of debt at the top. This is epic. And mindboggling. Every excecutive and banker should be fired across the board. Until this strong dollar theme plays out, it will be tough. But the mining sector will snap back 10% here. It is so oversold and can easily rally 10-20% and still be in the downtrend. I couldn't imagine sleeping being short here. Even worse than long. As long as Bernanke and Yen are printing all they can. Europe going to start printing even more soon.
This is a cyclical industry. Mid cycle earnings power is $3/share, peak cycle is $8/share. There is value at $17 i think. It could fall to $14 but i think it would come back to this price. Its $3 down $8 up in the near term. Some day steel produciton picks up, and the supply chain will want met coal all at once and the price of met coal will go up and so will Walter. Walter cash cost to mine is very low. They will not go bankrupt or have to issue new shares or anything anytime soon. They are not bleeding cash. Maybe a little after cap ex. I am a serious bag holder at $22. Better than most here. But after doing research, i'm not crazy about Walt valuation relative to other miners, but pushing the sell button here would be rash. Hunkering down and waiting for a better day.
Also, X could be set up for a trading rally this week. It hasn't had an up move yet this year, i'm thinking that Q2 guidance from AKS and X will not be a disaster. STLD was pretty optimistic about demand.
WLT assets on the books that they had before buying western coal are only valued at $675 million. At the time of the acquition WLT was $80 and had a market cap of $4.5 billion. I would say that the $675 million is probably understated by a factor of 2 or 3. Really looking at book value is very hard for these co's.
Just 2 quarters ago WLT was doing about $2/year in profits. So WLT is trading at about 9 times mid cycle earnings and about 3 times mid cycle ebitda. I think WLT is now in the realm of fairly valued. Especially when you consider that at $250 met they earn about $8/share. Not sure if prices can get back up there again. I don't think it is screaming undervalued relative to other coal stocks though. And you could be right that it is overvalued, but not by much anymore. Alot of analysts through out price targets in the $30s and even $40's. the lowest have moved to $19 and $20 i think.
Their is value, alot of optionality value. At $250 coal price They earn $6-$8/share maybe more. So its trading at 2 or 3 times peak earnings and 1.5 times peak Ebitda. So that is kinda cheap, LOL. Another thing is that at curent prices, even though reported earnings are negative, when you back out depreciation, amortization and other accoutning stuff, cash flow before cap ex isn't really negative, so its not like they are bleeding much. The valuation is probably in line with peers now so i wouldnt expect the cascade down to continue. It should just bounce around with ANR BTU ect, which aren't really crashing, and could be bottoming. Good luck.
Nat gas is $14 around the world versus $4 here. Overseas they are switching too coal from dangerous Nuclear and expesnive nat gas. Developing countries all powering up with coal. Coal works at $4+ nat gas and we are there. $4.50+ for appalachian i here. We will be there soon. Read BTU press release. Very bullish on the future of coal. Very imformative. Tons of new coal plants coming on line around the world.
That was Jan $23. I wonder how they got the value of $48? things were just as bad then as now for met coal pricing. If anthing, now they are on a slightly upswing. I hope there is something here so it can get back to $22. LOL.
if they can't, then this stock isn't worth more than current price. If it can then fair value is $25+. I It really appears that $30 was an amazing price to be short. It wasn't worth the price. I hope i'm wrong. I'm stuck in size position. It will go back to $22 i'm sure. But i don't know why it should. Is their any chance of Aubrey guy getting seats on board? Would that make the stock go way up?
I lost alot shorting this at $120, it would always squeeze to $130. What a joke. I was always too scared to short in high 30's because of that.
What makes you think it is muted? Were you expecting worse. It says the plants will have to all upgrade their stuff. Maybe some won't and will switch to nat gas? I know nothing.
are they thinking that housing will stall in 2nd half. I actually think that is possible on year over year comps. Not sure builders will have much year over year order growth come the fall. As the big jump up happened late last fall. What say you?? Seems better to be long than short at $17.30 though. I am long.
How could BTU be the best stock in the market on news yesterday. And then today it loses everything on nothing. The robots have lost control of the market.
Maybe that is good value in this Bernanke home building market. Long tem watch out though. Bounce to $23.50 soon i hope.
Stability? There is nothing stable about CVI. If the brent spread falls to $4 and we keep driving fewer and fewer miles, the gulf coast refineries that are larger and more efficient could flood the country with gasoline and the dividend could easily get cut in half in a few years. $45 for CVI seems ok, but i wouldn't tough CVRR over $27. Icahn sold the units at $25 because he thought that was a fair price. Things are worse now than then spread wise.
I read that USG has $2 billion in NOL tax asset. So the first $2 billion they earn is tax free i think. So this probably is worth present value maybe $400 million or so. $4 share. If sales go up 20%, the operating leverage is incredible. They would make well over a buck a quarter. So i guess thats where the valuation comes from. If sales go up 10%. They would make about 60 cents a quarter i think. But once again, lets say they put up $4/share in earnings. What PE will market give them. Probably a 6-11PE. so stock would be $24-44. It would get a low cyclical stock valuation.
I never understood the valuation either. They added so much debt. I was wondering if market likes that they won't have to pay taxes for along time because of past losses. One thing they have is enormous operating leverage to more volume which i guess in theory they could make $4/share in a single year with enough volume. LPX makes a little more sense to me. At least it has real earnings. But also, I remember that LPX got a single digit PE in good times. So the forward PE of 11's. how much does that really impress. I have a sneaking suspicion that the entire housing cohort made its move and it will be a mostly sideways movement over the next 18 months. Maybe a little drift up every so often on good housing news.
Where is the housing mafia. Have they left the sector? Where are the buyers. Was it just last years trade? Does anyone know if USG has an unrecognized tax asset? I mean thats not on the balance sheet. Hidden tax asset? And if how much per share? Thanks. I really don't understand the high PE and wondering why the market gives them the valuation that it does. Any help? thanks.
This is UGLY!
I'm long and you know i hate the homebuilders. I'm long USG too. particularly dislocated in price under $24. It always comes back to 26. MHO sold shares at $23.25 or $23.75. That is pretty dislocated near 20. But you know i don't like home builders as a long term investment. Forward PE actually says 12 now on PHM. High by historic standards, but not in Bernanke world and world of fewer smaller builders.
thanks to Bernanke and junk credit bubble, even with a credit downgrade, the small amount of 2013 and 2014 bonds coming due over next 2 years, can probably be refinanced at an even LOWER rate than they are going off at. Amazing but true.