According to BTU's Short Interest Ratio, Short interest can be a measure of investor pessimism. As contrarians, the heavy Short Interest Ratio is seen as a bullish sign for uptrending stocks. However, if a stock is in a downtrend, it could suffer additional losses as the bears increase their short positions. Let's see the chart below:
Source: Schaeffer ResearchCurrently, BTU's chart is also forming a bull pennant and falling wedge that are signal to buy. Let's see the chart below:
Citigroup Global Markets analyst John Hill on July 6, figures that the sell-off was overdone, and that coal is benefiting from "structural change" as fragmented regional markets are linking up and "going global."
In a note to clients he wrote:
This [sell-off] seems profit-taking amid a deteriorating economy, and the 'End of the beginning, not the beginning of the end.'
Mr. Hill believes that the bull market for coal has several years left to run because of mine shortfalls, transport constraints, thin stockpiles and massive demand from emerging markets like China and India.
While he expects metallurgical coal prices to increase through 2009, he thinks that a lot of the names in that space are fully valued. But he believes that the coal producers in the Powder River Basin in the United States are undervalued, and has upgraded Peabody Energy Corp. (BTU) and Arch Coal Inc. (ACI) to "buy" from "hold."
Here is the summary of Guy Bennett's Article in SA, Entitled "Coal Stocks: Make Money in Picks and Shovels" :
Currently, 50% of the electricity generated in North America comes from burning coal. While China currently generates 80% of its electricity from coal. There is enough coal left on the planet to last another 230 years. Since 2000, the price of coal has risen from $30 per tonne to around $120 per tonne. The Chinese are paying twice as much for coal now than they did a year ago.
In recent months, any stock with coal dust on it has been heading north.
Patriot Coal (NYSE: PCX) is up 300% in the last 4 months. Alpha Natural Resources (NYSE: ANR) is up 500% in the last year. Peabody Energy Corp (NYSE: BTU) is up 166% in the last 10 weeks. Van Eck Market Vectors Coal ETF (NYSE: KOL) is up 43% in the last 3 months.
The last couple of weeks, Patriot Coal lost 18%, Alpha declined 10%, Peabody is down 12% and the Van Eck Coal ETF fell more than 10%. Industry analysts believe that coal supply deficits will continue until 2011.
Bucyrus International Inc. (Nasdaq: BUCY) is a $4.6 billion company that manufactures equipment for the coal mining industry, and other mining sectors.
They have surpassed analyst earnings estimates for the last four quarters by an average of about 18%. Q108 orders increased 58%. They currently have a backlog of $2.07 billion worth of mining equipment on order.
Their biggest competitors, Joy Global In (Nasdaq: JOYG) and CNH Global NV (NYSE: CNH) have quarterly revenue growth of 34% an and 25% - compared with Bucyrus’s quarterly growth of 171%.
Bucyrus share price has doubled over the last 12 months. This is not a volatile stock. The gains are steady, attracting risk-averse value investors. A resource boom will create winners out of companies that sell picks and shovels.
Worldwide, we consume about $1.5 trillion worth of coal per year. Coal is mined in 100 different countries. Environmentally it’s a bad marriage, but until we divorce – as investors – we may as well treat it with respect.
Related Posts :
Lets Consider to Buy Peabody Energy Corp. (BTU) and other coals
Bucyrus International, Inc. (BUCY) Pre-Earning Release
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