What’s that? Invest in dirty sooty 100% carbon coal when President Obama is promising to cap and trade your smoke-stackin’ ass into penury?
Are you nuts?
Well, sure– a little… but that’s besides the point! Remember, Jacksonians, the market is a discounting mechanism. I think you will find— via the magic of the charts– that the market has already digested Mr. Obama’s misguided command and control policy attempts here, and perhaps has grown a bit skeptical of those plans’ chances for passing.
My new Jacksonian Core Holding is Natural Resource Partners’ L.P., (NYSE: NRP) (PPT: STRONG BUY). It’s important to highlight that NRP is a coal royalty company, and not a coal mining company, which is important, as coal royalty companies take no operational risk, aside from that of replacing an impaired lessee on their lands, and have a relatively simple balance sheet consisting of hard commodity assets. Here’s NRP’s description:
Natural Resource Partners L.P., through its subsidiaries, engages in the ownership and management of coal properties in Appalachia, the Illinois Basin, and the Powder River Basin regions of the United States. The company leases its properties to coal mine operators in exchange for royalty payments. It also engages in coal infrastructure business and the ownership of aggregate reserves that are leased to operators. As of December 31, 2008, the company owned or controlled approximately 2.1 billion tons of proven and probable coal reserves. As of the above date, its coal reserves were subject to 201 leases with 73 lessees. The company was founded in 2002 and is based in Houston, Texas.
The highlight is important, as it indicates ownership of about $92.5 billion in coal reserves for a company currently trading at around $1.6 bn in market cap. While this is of course not an apples to apples value comparison, as coal in the ground is not valued like mined coal ready for use, it is an indication of the long term financial stability of this partnership, given the status of coal in our energy cycle (over 50% of our electricty is generated by coal) especially in these unsteady times. Combine that with an 8.5% dividend at today’s prices, and you’ve got a nice piece of anthracite with which to shore up your portfolio. The aggregates business is a nice diversifier, but I am in this one for the real black-gold that makes up 94% of our country’s energy reserves — high BTU anthracite.
The downside for you tax nebbishes is that NRP is a publicly traded limited partnership (“L.P.”) so you will receive a K-1 for your dividends and capital allocations, instead of the standard 1099. The good news is, a good portion of NRP’s dividend has a capital gains component attached to it, which will actually boost your after tax cash “keep” on April 15th.
I think you can tell by the chart and its annotations, that NRP has finally cleared some significant traffic here, and poked it’s head into an area of significant free-air. Look for any chopping up of Obama’s carbon grab in Congress to shoot NRP higher. I’m locking in the divs here, and am long 7k shares with an eye towards adding today.
And now, the weekly chart, which us also indicating significant upside potential, as well as intermediate term price targets:
Caveat: If you attempt to follow me into NRP, there’s a strong chance Barack Obama will arrive at your house and bum all your cigarettes, and you may lose value in your positions.
Be well, and be attentive to your government, Jacksonians.
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