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.
That being said, I haven’t sold anything in the “All In” portfolio. Because despite the selloff in coal equities, coal prices across the board continue to rise everyday this week.
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.
New Position
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.
Get access to the new stock idea and all of my other research reports for only $10/month and join alongside 550 other investors.
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I'm out of the coal equities. China risk to too big for me to understand. If China blows up so do met markets. https://twitter.com/redditinvestors/status/1439946632330678277
How are you playing the evergrande sell off?