Sunday, February 8, 2015

Analysis of Alpha Natural Resources

Please read the disclaimer here: Enjoy the article, bitches!

Sup guys, today I will be analyzing a company that I previously added to the Greedy Dragon portfolio but didn’t write about as I was busy with other stuff. Alpha Natural Resources is a coal mining company that’s listed on the NYSE (stock code: ANR). I first took a position in ANR at $2.23 per share and added to my position at $1.54 per share. The stock closed at $1.16 per share on Friday. I don’t think that things have deteriorated significantly enough for me to reassess my investment in ANR so I’m not worried about the paper loss. And no, I’m not the kind of asshole that dismisses his investment mistakes as mere paper losses (I may be an asshole, but I’m not that kind of asshole).  I will readily admit that I made investments where the fundamentals eventually got impaired and I had to accept that the losses were permanent. Investing in coal mining companies right now is risky because some of them might actually go bankrupt if coal prices remain at depressed levels for a prolonged period of time. However, I think that I have a chance at making some serious money if I can find coal mining stocks that are able to survive this rough patch.     

Excluding depreciation, depletion & amortization, asset impairment & restructuring, and amortization of acquired intangibles, ANR experienced a loss before tax of $53.74 million for the quarter ended September 30, 2014. There may be other non-cash expenses and non-cash income, so the company’s financial performance may actually be better or worse.  You might be wondering why I don’t just look at the cash flow statement to find any other non-cash items. Well, it’s because the cash flow statement in the quarterly report was for 3 quarters, and the prices ANR got for its coal could be different in each quarter. I want to know how the company is doing with coal prices that are as recent as possible (coal prices could have fallen even further since September 30, 2014. I just hope that if there was a decline in coal prices, it wasn’t a significant one as that would suck dick). It’s really important for investors in coal mining companies to check the realized coal prices and financial performance of their investments often.

While ANR did lose money in the quarter ended September 30, 2014, the company does have a significant cash buffer. The company had cash and cash equivalents of $809.41 million and short term marketable securities of $374.52 million as at September 30, 2014. ANR’s long-term debt of $3.71 billion is indeed a significant amount, but the company does have some time before the more sizable chunks of its debt starts to mature.  As at September 30, 2014, the company’s current portion of long-term debt was $176.94 million. The company has $153.65 million of debt maturing in 2015 and $345 million of debt maturing in 2017. It’s from 2018 onwards where more sizable chunks of its debt start to mature.

I think I will conclude the article here. It’s kinda short as I’m only analyzing the survivability of the company and not long-term profitability. I hope you enjoyed reading this article anyway. Thank you for reading. Take care and stay rational.

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