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?).

Year To Date Gains Stand At 20%

In what will unquestionably become the “Hubris Top Tick” post, I will go on the record and admit that yesterday, my account crossed 20% gains this year for the first time.

CCJ sealed the deal for me. After taking a nasty selloff, it exploded over the last week and a half, up 14%, which accounted for half the push from my prior 15%. The other half got picked up here and there.

I’m unsure how long I’ll be hanging out here. HCLP, which is without a doubt the hero of 2014, is reporting earnings first thing in August. The partnership has come a hell of a long way. Will this lead to a pullback? It wouldn’t surprise me, although I’ve decided to hold fast and keep the faith.

The coal trade isn’t working yet; but then again I did decide to forgo a quick entry, opting for steady accumulation. So a slow start is actually better for me.

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.

Checking In – Year To Date +16%

I haven’t checked in much recently, and for good reason. You, dear reader, probably check out of life enough without having an excuse to. There’s a big bright world outside, and you are missing it, neglecting your children in favor of reading a blog on the internet, run by a man you have never met.

Today, the weather is crappy (in my neck of the woods, anyway), so I will take a minute to scrawl out some thoughts. But really, go outside already.

When you are lying on your death bed, you are not going to regret never getting to read another stock picking article. If you are a normal man, you will probably regret not staring at clouds more often. Or gazing at the stars. Or feeling the warm breeze on your skin, standing by the water.

You may check in once per day to read my work. You have my permission. But other than that, get your ass outside. You’re not getting any younger, buddy.

Writing has been scant here because I have been following my own advise. Despite this neglect, my person is doing just fine. Year to date, my gains are just now over 16%. CCJ has pushed back above $20, and if it can recover to $23, I’ll be sitting inside 20% shortly.

Almost all my positions are higher. HCLP and BAS seem to be breathing, but that’s alright. Everything is holding up well.

Sold UEC, SLW, Partial Sales of CCJ, HCLP

This morning:

I completely sold out of UEC (5% cash raise).

I completely sold out of SLW for +5% (11% cash raise)

I then sold down CCJ and HCLP (my two remaining largest positions) until my cash position was 25%.

HCLP remains my largest and most successful position this year, +170% since I bought it last August. CCJ is an idea I remain committed to, but it’s gone nowhere and I need some cash.

UEC is small, speculative, and just asking for a beat down.

SLW was a quick trade, not an investment.

It’s time to start letting off the gas. Because, let me ask you: isn’t this getting a little out of hand?

Here’s What’s Not Working For Me Right Now

What is working for me is pretty obvious to anyone following. HCLP and BAS are setting my year, single handedly. Even factoring in my biggest misses so far, my gains stand back above 10% YTD.

But I’m not going to just steadily publish a slew of feel good pieces, brushing my ugly ducklings under the mat. So this post will focus on them, why they aren’t performing, and what I intend to do about it.

First up is NRP. NRP is a debt ridden resource MLP whose largest assets are comprised of metallurgical coal deposits. The partnership has been hammered since I bought in at $20, currently standing just below $14. Back in January, I cut a lot of this position for around $16, but recently added back above $15. The position stands at around 6% of assets and I have a big loss attached to it.

As for why NRP is down more than 40% this year, there are two big factors driving the outcome. The first is the obvious hatred of all things coal, based on falling global demand and unfriendly domestic politics. The second is that people generally mistrust this position specifically and are betting they’ll have to raise cash through dilutions. The company has a lot of debt coming due.

My opinion is that NRP has already suffered enough to justify the prices at $20, and my opinion hasn’t changed much at $14. I’m not knee jerk afraid of shareholder dilutions and like the steps NRP has taken to diversify their assets away from a pure coal play. I also think coal is set to rebound. In the meantime, even if they slash their distribution by 25%, that would leave it paying out 7% annually, which is far above market yield. However, I will not be adding more until I see market sentiment shift, preferring instead to add other coal related investments and keeping company specific risk low – building my coal thesis out of many smaller parts. BTU is my first secondary choice, and I’ll probably follow up with a third play next year if coal names are still depressed then.

My second ugly child is CCJ. This is kind of amusing, as I really haven’t lost money on CCJ this year. Cameco and related names rallied hard starting around February helping press my gains to 15% early on, and CCJ’s unceremonious relapse was one of the biggest contributors to those gains sliding back below 10% a month ago. CCJ stands at $19, 5-10% below my average cost per share.

CCJ’s problem is also bicausal. The market for uranium remains abysmal, and spot prices have plunged another 20% this year. That’s the pricing for when there are uranium trades at all. My smaller, half scaled position, UEC, made ZERO sales in the first quarter of this year. The market for uranium is near-totally dead. CCJ has largely fended off impact from this pricing issue through their long term supply agreements. However, that can only get you so far.

But CCJ has a second big problem, which is a very large (and growing) deferred (some may say dodged) tax liability to the Canadian government. The price tag is set to cross $1 billion shortly and will probably be almost three years worth of earnings when we’re set and done here. This is why CCJ’s stock is performing so much worse than its dumber, small peers this year.

And I am not at all concerned about CCJ. I’m electing to sit back and do nothing. The tax bill is a non issue. Without question, Canadian corporate governance is much harsher than the US, and there will be consequences for CCJ. They will be made to pay up, and someone will probably get punished. However, even given the magnitude of the bill, it’s hard to see how this changes the stock dynamics.

To put this into perspective, consider APC back when the oil well blew up. People freaked out at the billions of dollars they would owe in damages and bid the stock down an absurd amount. And then, it no longer mattered. The company made a full recovery in a hurry. As then, CCJ’s market prospects look bright on the horizon. They will be made to pay past owed taxes and that hit will sting, but it’s a one time issue and when you consider how stock multiples are priced into shares, the truth is CCJ’s larger problems (business) when worked through will more than totally swallow this blip on the radar. From the perspective of shareholders, at this point and at this price, CCJ’s only problem is the uranium market. The tax liability will be worked through and take care of itself shortly, if only the damn uranium market can recover.

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?).

Year To Date Gains Stand At 20%

In what will unquestionably become the “Hubris Top Tick” post, I will go on the record and admit that yesterday, my account crossed 20% gains this year for the first time.

CCJ sealed the deal for me. After taking a nasty selloff, it exploded over the last week and a half, up 14%, which accounted for half the push from my prior 15%. The other half got picked up here and there.

I’m unsure how long I’ll be hanging out here. HCLP, which is without a doubt the hero of 2014, is reporting earnings first thing in August. The partnership has come a hell of a long way. Will this lead to a pullback? It wouldn’t surprise me, although I’ve decided to hold fast and keep the faith.

The coal trade isn’t working yet; but then again I did decide to forgo a quick entry, opting for steady accumulation. So a slow start is actually better for me.

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.

Checking In – Year To Date +16%

I haven’t checked in much recently, and for good reason. You, dear reader, probably check out of life enough without having an excuse to. There’s a big bright world outside, and you are missing it, neglecting your children in favor of reading a blog on the internet, run by a man you have never met.

Today, the weather is crappy (in my neck of the woods, anyway), so I will take a minute to scrawl out some thoughts. But really, go outside already.

When you are lying on your death bed, you are not going to regret never getting to read another stock picking article. If you are a normal man, you will probably regret not staring at clouds more often. Or gazing at the stars. Or feeling the warm breeze on your skin, standing by the water.

You may check in once per day to read my work. You have my permission. But other than that, get your ass outside. You’re not getting any younger, buddy.

Writing has been scant here because I have been following my own advise. Despite this neglect, my person is doing just fine. Year to date, my gains are just now over 16%. CCJ has pushed back above $20, and if it can recover to $23, I’ll be sitting inside 20% shortly.

Almost all my positions are higher. HCLP and BAS seem to be breathing, but that’s alright. Everything is holding up well.

Sold UEC, SLW, Partial Sales of CCJ, HCLP

This morning:

I completely sold out of UEC (5% cash raise).

I completely sold out of SLW for +5% (11% cash raise)

I then sold down CCJ and HCLP (my two remaining largest positions) until my cash position was 25%.

HCLP remains my largest and most successful position this year, +170% since I bought it last August. CCJ is an idea I remain committed to, but it’s gone nowhere and I need some cash.

UEC is small, speculative, and just asking for a beat down.

SLW was a quick trade, not an investment.

It’s time to start letting off the gas. Because, let me ask you: isn’t this getting a little out of hand?

Here’s What’s Not Working For Me Right Now

What is working for me is pretty obvious to anyone following. HCLP and BAS are setting my year, single handedly. Even factoring in my biggest misses so far, my gains stand back above 10% YTD.

But I’m not going to just steadily publish a slew of feel good pieces, brushing my ugly ducklings under the mat. So this post will focus on them, why they aren’t performing, and what I intend to do about it.

First up is NRP. NRP is a debt ridden resource MLP whose largest assets are comprised of metallurgical coal deposits. The partnership has been hammered since I bought in at $20, currently standing just below $14. Back in January, I cut a lot of this position for around $16, but recently added back above $15. The position stands at around 6% of assets and I have a big loss attached to it.

As for why NRP is down more than 40% this year, there are two big factors driving the outcome. The first is the obvious hatred of all things coal, based on falling global demand and unfriendly domestic politics. The second is that people generally mistrust this position specifically and are betting they’ll have to raise cash through dilutions. The company has a lot of debt coming due.

My opinion is that NRP has already suffered enough to justify the prices at $20, and my opinion hasn’t changed much at $14. I’m not knee jerk afraid of shareholder dilutions and like the steps NRP has taken to diversify their assets away from a pure coal play. I also think coal is set to rebound. In the meantime, even if they slash their distribution by 25%, that would leave it paying out 7% annually, which is far above market yield. However, I will not be adding more until I see market sentiment shift, preferring instead to add other coal related investments and keeping company specific risk low – building my coal thesis out of many smaller parts. BTU is my first secondary choice, and I’ll probably follow up with a third play next year if coal names are still depressed then.

My second ugly child is CCJ. This is kind of amusing, as I really haven’t lost money on CCJ this year. Cameco and related names rallied hard starting around February helping press my gains to 15% early on, and CCJ’s unceremonious relapse was one of the biggest contributors to those gains sliding back below 10% a month ago. CCJ stands at $19, 5-10% below my average cost per share.

CCJ’s problem is also bicausal. The market for uranium remains abysmal, and spot prices have plunged another 20% this year. That’s the pricing for when there are uranium trades at all. My smaller, half scaled position, UEC, made ZERO sales in the first quarter of this year. The market for uranium is near-totally dead. CCJ has largely fended off impact from this pricing issue through their long term supply agreements. However, that can only get you so far.

But CCJ has a second big problem, which is a very large (and growing) deferred (some may say dodged) tax liability to the Canadian government. The price tag is set to cross $1 billion shortly and will probably be almost three years worth of earnings when we’re set and done here. This is why CCJ’s stock is performing so much worse than its dumber, small peers this year.

And I am not at all concerned about CCJ. I’m electing to sit back and do nothing. The tax bill is a non issue. Without question, Canadian corporate governance is much harsher than the US, and there will be consequences for CCJ. They will be made to pay up, and someone will probably get punished. However, even given the magnitude of the bill, it’s hard to see how this changes the stock dynamics.

To put this into perspective, consider APC back when the oil well blew up. People freaked out at the billions of dollars they would owe in damages and bid the stock down an absurd amount. And then, it no longer mattered. The company made a full recovery in a hurry. As then, CCJ’s market prospects look bright on the horizon. They will be made to pay past owed taxes and that hit will sting, but it’s a one time issue and when you consider how stock multiples are priced into shares, the truth is CCJ’s larger problems (business) when worked through will more than totally swallow this blip on the radar. From the perspective of shareholders, at this point and at this price, CCJ’s only problem is the uranium market. The tax liability will be worked through and take care of itself shortly, if only the damn uranium market can recover.

Previous Posts by Mr. Cain Thaler