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Jim's
rating on
this stock |
STOCK
SYMBOL |
Closing
price that
day |
Full Company Name |
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ACI |
16.63 |
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CLX |
53.80 |
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Jim:
Tonight, we're
talking about the
collapse of King
Coal... Coal, the
commodity, has
fallen off a cliff,
along with oil
prices. Central
Appalachian coal is
down 49% from where
it was on July 1st.
I mean, this stuff
is just
staggering...
Powder River
Basin coal was down
32%. Coal stocks
have been hit even
harder, as they're
some of the worst
victims of "hedge
funds gone wild"...
Market Vectors
Coal ETF (KOL),
a coal stock ETF, is
down 75% over the
same period... All
of the hedge funds
that made their big
energy bet have been
forced to sell their
big energy
positions, as their
clients demand their
money back, and it's
not over...
at the moment at
least, for the hedge
funds... and, until
they've finished
their selling, I
don't think any of
the coal stocks are
safe.
On this show, we
feel uniformly that
Obama is against
coal, because he
uses the oxymoron,
"clean coal"... and
we know there's no
such thing. We did a
week trying to find
clean coal stocks
and none of them
hold up. To us, it's
a kinard... that
means no coal...
which may be why the
stocks have way
overshot the
commodity on the way
down...
It didn't help today
that
Arch Coal Inc. (ACI)
reported a
not-so-hot quarter,
with earnings coming
in at 49 cents a
share, when the
Street was looking
for 59 cents, and
the company also
lowered its 2008
guidance. It seemed
like ACI was hurt by
trading losses. It
also looked like it
was experience an
inventory buildup...
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Continued below...
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Monday,
October 27, 2008
(Cont'd from
above)...
That is the kiss
of death... an
inventory
buildup at its
main Powder
River Basin
region. They
also announced
the idling of a
drag line, and a
shovel... think
a big industrial
shovel for coal
mining...
Arch Coal Inc. (ACI)'s
CEO, Stephen
Lear, admitted
that coal demand
was slowing, but
pointed to
export sales as
one of the
things that
should make for
a strong 2009...
Honestly, I
don't know how
well Lear's
argument is
going to hold
up, as China
pretty much
dropped off the
map as an
importer, and
their central
bank...
unbelievably,
the Central Bank
of China, with
the worst
economy... still
refuses to cut.
ACI's demand
base seems to be
there. The
company
maintained that
coal supplies
are still tight,
and a lot of the
demand issues
are weather
related...
We've got 15.5
gigawatts of new
coal power
capacity under
construction in
the country
alone...
covering about
55 million tons
of coal demand a
year, so there's
definitely going
to be coal to
use, but the
coal market has
definitely seen
better days...
I would want to
take a hard look
at these stocks
under a McCain
win though.
Anybody who
says, "drill
baby, drill..."
would certainly
say, "pollute
with coal baby,
pollute with
coal..." but,
because the
shareholders who
own these coal
stocks, the
hedge funds gone
wild that were
once
"Fortresses" and
even "Citadels"
so to speak, are
still getting
redemptions.
I have no desire
to wade in...
If they paid
dividends of any
decent size,
then they would
be a better
story... but
no...
Here's the
bottom line...
Jim's comments
AFTER the interview:
For years and
years, coal was
a dirty, smelly
business with
dirty, smelly
stocks that made
you no money...
And now, once
again, unhappier
coal days are
here. The only
coal I endorse
here on this
show, on Mad
Money, in
Cramerica, under
an Obama
presidency...
will be
Kingsford's
(referring
sarcastically to
the popular
brand of
charcoal),
because parent
Clorox Co. (CLX)
yields 3.4%, a
heck of a lot
better than the
skimpy 2.16%
yield that
Arch Coal Inc. (ACI)
barely shovels
out to its
shareholders.
Read Jim's next Segment
here
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