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Happy Birthday iBC! – Also Back In BTU For $11.80

A magnanimous 7 years, and here is to 7 more.

I have very much enjoyed my time with this site. My stint goes back to the days of the old Peanut Gallery, when any reader could chance to write. I gathered myself a small little following, which I used to take down competitor after competitor.

Eventually, I was approached about joining in a permanent station.

Today I repurchased a position in BTU for $11.80. This move doesn’t make sense on some level, since this removes some of my losses for tax season. However, I’ve liked coal for a while now and BTU has a key advantage over other possible positions – I’ve already done due diligence on them.

I was already toying with the idea, and watching Fly move into BTU today got my own legs going.

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Sales – Stopped Well Shy At 3% Cash

I couldn’t bring myself to sell all the way to 20% cash. The waterfall left too many of my purchases underwater still and the hope of follow through pins me to my seat.

But I took quick profits in HCLP, VOC, BAS, and SXCP (I still own all four names, I just pared down sizing) ranging from 5-12%, and then I completely sold my BTU position for a 22% loss. That will lower the tax bill. I like BTU but it’s time to start thinking of April.

Despite having little cash, this lowers my risk profile substantially. The margin was worth it and if the oil and gas space has any sort of meaningful follow through, I’ll be back at new highs by Thanksgiving.

Gobble gobble.

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Down Over 2% Today

Well, the hubris post did it, and pointing out that when I crossed 20% YTD gains timed the top with almost cruel exactness. Just as we all knew it would.

BAS is taking the session the hardest for me, down almost 7%. They started a correction after earnings, and it looks to be picking up speed. My guess is a retest of the 200 day, putting them just over $20 a share, at which time I will be a buyer.

MAA is second worst, down over 5% on a disappointing…Core FFO number? FFO is very important in the real estate market, because it prices out depreciation of construction (which so long as your structure is sound is irrelevant). But they also just doubled their operation by acquiring my old position CLP, and seem to be continuing the spirit of development and expansion. They have sound debt levels making the process easier, with plenty of room to add leverage. And a strong wind at their backs in the form of a rising rent environment. I’m holding here because a 4% dividend and steady growth make MAA a sound enough investment once this passes.

Following next is a roughly four way tie between BTU, NRP, HCLP, and ETP. There seems to be a theme today of energy names being punished a little worse than the indices. Then again, people have hated coal for years and half the energy sector has huge gains unrealized with ample volume to round about escape losses elsewhere, so maybe this makes perfect sense.

CCJ had a good earnings report, continuing to kick the uranium market doldrums by personally doing just fine. Their long term contracts persist in rewarding them with a price well above the dismal spot market, and sales volumes have increased. So the market has rewarded them by only selling off 1.5%.

(Actually, I need to be honest. I am concerned that CCJ has managed to perform this well in this environment. Particularly because despite the better sales and earnings, they continued to lose cash – the only thing that really matters – and in light of the recent revelations of overseas corporations acting to enable financial games with their taxes. I’m going to be sniffing around very closely here, because I will not become prey to some corporate Enron nonsense)

AEC and silver are my “best” positions, each down “only” less than 1%.

Okay, so the market is getting clubbed. What do we do about it?

Well, if you’re in my position – and if you’ve been following me, that is quite possible – up still over 15% for the year, then the answer is pretty clear. You do nothing.

I can afford to do nothing here, to see if this hard drop doesn’t stabilize quickly and lead us higher through August. We should hit a bottom pretty quick. I don’t yet see a good catalyst for a major drop, outside of the regular bank failings and global “World War” heckling that usually bogs us down. For the moment, that’s no excuse to panic.

China, Europe, and most the rest of the world haven’t exactly been doing awesome before now. This isn’t news.

So there’s no rush here. 13% YTD gains is my floor. When I hit that point, I go to cash fast, because my year will be at least +13%. 13% because I was stuck between 10% and 15%, so let’s take the black prime number in the middle (scientific, right?).

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Today Doesn’t Matter Because I’m Up Another 1.5%

The typical Monday open has led way to the equally typical Monday reversal back to even. Short sellers look stupid, and behind their jaunting comments, are terrified.

Meanwhile, I’m up another 1.5% today, led by HCLP pressing towards $70 a share, and CCJ making a comeback.

My biggest loser today is BTU, which is almost down to $15. I’ll consider adding near $14, if it gets there.

Global events and political developments tend to be the dumbest reasons on Earth to trade around. It’s fun to speculate what idiot decided to ice a jetliner without any due diligence. Or how long before Gaza taps out. Or what would happen if political winds changed in this country and banned all forms of energy or interstate travel.

It’s fun, but it isn’t profitable.

So don’t waste your time on this nonsense, unless you’re bored at work, looking for an excuse to neglect your clients.

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Small Add To My BTU Position For $16.80

I added to BTU for $16.80. This is just a small addition; a couple of percent of my net worth.

This play on coal is to be edged into incrementally. There is no hurry.

I offset the purchase with a minor sale of HCLP, which has become outlandishly sized. It is near unanimously disproportionate to the rest of my holdings – I presently have more in HCLP than CCJ – which is astounding when you consider that CCJ has priced pretty steady to where I’ve held it, and it was once more than 20% of my portfolio.

HCLP makes up 26% of my holdings after today’s sale. I may pare back BAS and HCLP some more, just to get them back in line a little. I’ll think about it over the weekend.

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Bought Half Sized Position In ETP For $56.64

I found the terminal position I want, but it has nothing to do with coal. I bought a half sized position in ETP for $56.64.

Energy Transfer Partners, LP is a storage and distribution partnership that specializes in a diverse number of business lines, including (1) midstream, interstate and intrastate transportation and storage natural gas operations, (2) gathering, compression, treating, conditioning and processing of natural gas, and (3) purchasing and marketing natural gas and NGLs.

They’ve been making a flurry of acquisitions, their cash flows seem proper, and they seem cheap relative to peers. They also are paying me 6% in annual distributions to hang out. I like their market position and think the next 10 years will be big for them (same as BAS, same as HCLP).

This is right where I want to be. I’ll refocus energy on coal later – for the moment, I have half assembled positions in NRP and BTU.

Of course, at this stage in the game, it’s going to be hard to hit the kind of returns I got for BAS and HCLP. The market was just so negative about those positions and now since September of last year, it’s getting so expensive. But this is still a good buy here.

I admit it is getting a little harder to find positions to buy. Price to book of companies certainly looks heated, although that’s not the only measure. There are certainly some positions out there priced to fail, like EPD. And coal companies in general look terrible. It wasn’t just tech that got bid up last year.

But there are still lots of positions that are growing revenues and earnings just fast enough to keep that risk threshold around a 10 year horizon. It’s not the 5 year break even points you could have picked up in ’08, but what do you want?

Some of these positions are going to be stealth winner. I think coal names are artificially expensive, but really quite cheap. You have to consider how much of the “expensiveness” is being driven by low coal prices forcing write downs on entire proven reserves. So is the company selling the whole operation for that price level? That’s the big question isn’t it. If you get a coal price recovery, suddenly these operations are all trading <1X book with robust earnings growth.

95% invested.

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