Goddammit! Spent a while doing a post and it disappeared! Thought that bug had disappeared!
I ended up buying a small position in NHC, WHC, CRN. Had to hold my nose to do so, and I totally encourage a discussion on the ethics of investing in carbon based fuel sources in a separate thread. All I can say is my thoughts on the subject have shifted considerably since the invasion of Ukraine.
In the budget, the treasury predicted $60/ton for thermal coal next year. That would make all of our major coal producers hugely overpriced.
So, I tried to establish whether the rest of the world thought that also. Seems futures markets price coal quite differently.
This is a huge disparity.
Can anyone shed some light on a) who is right, and b) why this might occur?
I was in the garden a few days ago, trying not to get angry that the bush turkeys had once again destroyed my recent plantings, and ruminating on whether it was possible to try and get my hands on some kind of illegal firearm to solve the issue. Realising this was a fruitless direction, as a distraction, I listened to the Gaurav Sodhi meeting. It's a great insight. It totally changed my views on mining companies, from being capital intensive wealth destroyers, to being an industry prone to immense mis-pricing and hence a field full of rich opportunities for a contrarian investor. He explained his reasoning behind why he has been so bullish on coal stocks and, obviously, has done really well from that.
Even with that said, I was stunned when he said that he personally was still had 40% of his portfolio in coal stocks. Gaurav went to some lengths to explain he would not recommend this to others and that he was looking at taking profits. But still....40%.
The rationale being, that even at current prices, the earnings are just ENORMOUS, and look to continue for at least the short term, and quite possibly the medium term.
I won't re-hash the whole thesis, please have a listen, if you haven't already, but thought I would raise a couple of issues that interested people might discuss further:
To expand on the Big tobacco theme; most people are aware that investing in tobacco when all these risks were well known and litigation was getting going, and tobacco smoking rates were decreasing, would seem like a terrible idea. And yet.....it would have been the most successful strategy of all the options available to you:
A polite request:
When I was a member of the Motley Fool Pro, a recommendation was made to buy IXI, which is an ETF invested in consumer staples. Within that ETF were a couple of tobacco stocks. There ensued a heated, heartfelt, but ultimately highly destructive debate which deteriorated into a mud-slinging match and destroyed much of the original bonhomie. I was hesitant about writing about coal miners for fear of the same thing happening in this environment. I am going to ask members who choose to reply to this forum to a) firstly be polite and respectful to other members and b) NOT INCLUDE THE ETHICAL COMPONENTS OF THIS INVESTMENT THESIS. Should members feel the need to discuss the ethical aspects of investing in coal (or tobacco, or any other companies), could you please open another forum post titled appropriately. Many thanks.
Cigarette, anyone?