The “All In” portfolio was down $3,927 or 7.56% this week as coal equities across the board fell.
Since inception the portfolio is still up over 104%.
Coal equities fell likely due to weaker Chinese steel and iron ore production. In addition, the large increase in coal equities over the past month resulted in traders taking profits.
I trimmed some of my coal exposure this week to reallocate to a new position I recently wrote up.
The fundamentals for coal companies has gotten even stronger and if prices hold out for the next 3-6 months coal companies will rapidly change their capital structure as cash flows are generated.
I will continue to monitor the coal market extensively. Investing in commodities is tough and prices can turn at any minute. Should I start to see material weakness in met coal prices I will likely start taking additional profits and reallocate to different sectors of the market.
I acquired a new position last Thursday and wrote it up yesterday for subscribers.
The new company is a pretty unique special situation that was time sensitive so I didn’t spend as much time digging into the business model and really trying to understand the economics of the franchise.
Basically the stock is down over 80% over the past four years and forced selling from a rotation in the S&P SmallCap 600 resulted in non-fundamental investors dumping shares at basement level pricing.
In addition, the management team has started acquiring shares, there is a new corporate strategy that should improve operations, increase cash flow and de-risk future events. Finally, the stock is trading at under 0.40x price-to-book.
I think the stock will likely re-rate 50-100% over the next 12 months as the forced sellers are now out and the new business strategy kicks in. Buying alongside the management team at an all-time low provides additional confidence.
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