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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Very nice, thanks for your research. I may be an NRP buyer…
thank you Sir Gint
You’re most welcome… picking up another 1k right here, btw.
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Jake, Thanks. I’ve had similar “bad” thoughts about coal and some of its biggest users such as some utilities. I’m still confused as to the tax consequences of putting these in a Roth IRA. I’ve heard conflicting advice, although my CPA says they should be OK.
Same confusion/question as Y&BB, except I would be putting mine in a traditional IRA.
Great job, Jake. Appreciate your efforts.
Great charts Jake. Fortunatly I don’t have any cigarettes so I guess I am safe from Obama?
I’m still confused as to the tax consequences of putting these in a Roth IRA.
There’s no tax benefits in a Roth, but then that also means you get the whole frippin divvy untaxed. This is true also of a regular IRA, save that the accumulated bennies will get taxed upon withdrawl.
Seriously though? I wouldn’t put much stock in those Roths remaining not taxable over the next twenty years.
Not with this greedy ass gummint.
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Caveman,
If you have no coffin nails when BO comes a bummin’ woe is unto you.
You will immediately be assessed a breathing tax equivalent to 2,800 cartons of Kool menthols at New York prices.
Lesson: remain well stocked, as you know not the hour the Messiah will arrive.
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Sounds interesting, I’ll have to remember to take a look at it.
Also, kudos for the picture of the coal excavator; is it a Russian model? You can find one of those in Gilette, WY, actually, although I believe it’s a smaller version, (each of the teeth can contain ‘only’ three pick up trucks or so).
The coal industry bought it from some Russian company for several million, but the fools never checked to compare ideal soil conditions for operation. When they first attempted to use it, the considerably harder Wyoming ground almost ripped the bucket teeth off of it.
It now sits on the edge of the road, unused, and makes for a fairly good story, if you know where to find it.
Mr. Thaler:
It’s German, built by Thyssen-Krupp and it is the world’s largest rotating shovel.
First made its internet rounds about 2-3 years ago…
Contrary to what our host has pronounced, THIS is one of the most important statements of this century:
http://theplumline.whorunsgov.com/probes-of-bush-administration/nadler-obamas-torture-comments-prove-probe-is-required-by-law/
Rep. Jerrold Nadler:
“The president stated (last night) in so many words: Waterboarding is torture, the previous administration has admitted that it waterboarded, and torture is a violation of international law,” Nadler said.
“Once this is admitted, there must be an investigation. It forces the Justice Department on this path.”
Let the prosecutions begin.
Well goffer, the Democrats should be more careful about where they step. I’m not saying I agree with torture, but given the popularity of the recent bailouts, if they don’t excercise some level of restraint, when the power lines are redrawn, they may find vindictive Republicans using these same precedings to exact revenge.
Given that Bush and Obama (and his wife) are CFR members, and Cheney is a former CFR chairman, I don’t see much difference between these guys. They’re all pro-socialist/communist because that allows the people they represent to consolidate power more effectively, for the long term. CFR is hard-core pro-socialist/communist. David Rockefeller, the heart of the CFR, has been flagrantly public about his communist leanings.
Any talk of one CFR member putting another in prison is political spin to qualm the masses and keep them turning the hamster wheel, assuming something is being done. Nothing will ever come of it.
Goffer, go get yer shinebox. Jerry Nadler is the fattest sweatiest partisan hack in the entire Congress, and that’s saying a shitload.
IOW — his sweaty greasy, heavy breathing bullshit is not to be credited.
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Cain — yeah I thought that pic was pretty cool too.
Like something dropped by the Empire from Star Wars.
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You should look up Ursa Major. That’s the key piece of equipment used at the Black Thunder mine in Wyoming. I don’t know how they compare, but it is also an impressive piece of machinery.
Well I’m sold on this stock. To add to what you’ve already said, I’ve pegged an intrinsic worth of just under $10 a share based on their latest filings, giving a price to book ratio of about 2, which is relatively good when compared to other sectors.
Cain — Ursa’s big, but not so much out of a nightmare like that London-Bridge-Gone-Jason-Voorhees pictured above.
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Here is the tax consequence.
Unrelated Business Income Tax – Special Rules
http://www.irs.gov/charities/article/0,,id=96106,00.html
Only the partnership will know.
Jake:
I have to congratulate you on the blogging. This stuff is great! Keep it coming.
I’ve been cashing in some of my huge profits from the speculative position I took in DNDN some weeks back, and legging back into the PM miners. I continue to like Aurizon Mines (AZK) and am starting to get a bit top heavy in the name as it continues to trade down. I can’t understand the fall in price. It would seem they just raised enough money to extinguish all debt and are in a good position to fund a massive expansion program either on their various prospective properties or through acquisition. Cash flow and management both appear to be strong.
Do you have any thoughts on the company? Price is now quite a bit below what the financiers put up for their recent shares. One would think they would know better than us what is to come from this company, no? Nobody dumps that kind of cash without being allowed a peek into the future…
Took some AZK off the table @ $4.02 (about 20% of my AZK holdings) Booked a quick 5% and rebalanced the boat slightly. Still probably have too many shares (they were/are screaming cheap), but I think I’ll let the balance of them ride.
Dumped the proceeds into MVIS @ $1.78. I could regret this move, but I’m only looking for 5%.
Jake, have fun at the derby. I will look for ya on T.V.
Jake, can you fashion a ‘death to commies’ sign and hold it up high so I can see ya on the vizzle?
Apologies, I am at the track and cannot look at AZK right now. Will have to check it out tonight.
great stuff, jake. coal is really getting some traction here.
Dpeez- word to ya mothah– at Churchill Downs, like in any liquid market– “Death to Commies” is a given.
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Have yourself a mint julep for me, Jake.
And make it a double. I’m thirsty.
watch out though…’one mint julep’ was the cause of it all.
http://www.last.fm/music/The+Clovers/_/One+Mint+Julep
“Apologies, I am at the track and cannot look at AZK right now”
At the Track…LOL what are you some OTB junkie MOFO…
have a good time….put up some egregious bets for tomorrow, I feel like doing something stupid.
Jake…the moly plays are working..china is still buying in size and asking for more moly..so this should have some legs
KC Bill — you obviously don’t understand the idiom that is Derby.
It is the last thing from OTB dirtbaggery.
Post upcoming….
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RH, do you think this purchasing will have a similar effect on the titanium providers as well?
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not sure..titanium i dont see too much info..the chinese are buying mostly copper, steel, iron ore, uranium, moybdenum ,urea and methanol, the ones they are buying most..they are not buying as much aluminum,zinc,coking coal or meth coal, ethylene and potash. as the first group…copper stocks had huge run and now is talked about by too many so i sold those today…moly and uranium would be the best choices IMHO
^^^
Thx, RHill. I was thinking about this RTI I picked up the other day…
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