WWTBAM Bored

As outlined in the other "current" stock market thread-

Over the weekend I kind of randomly landed on coal stocks as a possible undervalued asset class that maybe had some long-term upside-ie they might be a current version of a 2000-era tobacco company.

While doing some very basic research on coal investing I ran across a lot of videos by Mohnish Pabrai. He was a friend of Charlie Munger (Warren Buffet's partner) and is Buffett and Ben Graham acolyte.

As recently as 2 years ago-he didn't own any coal stocks and had never even looked at the space. However, somebody alerted him to a coal company and said it might fit the financial profile of the type of company he is interested in. As you can see in the video he got very interested.

https://www.youtube.com/watch?v=6hhkbN-GaVM

The coal part starts at about 6:30 and runs for about 2 minutes. i have listened to a lot more in-depth discussions of how and why he found the coal companies attractive but this 2 minutes really hits the core of it.

Actually, the first minute would also be of interest for those inclined to panic over 5% losses in the stock market as in the other thread.

If intrigued, the rest of the short video gets into his investments in Turkey which are also interesting.

Basically, he has reached a point in his life with his Turkey and Coal investment that he is just going to sit on them long-term and really not do much further investing and he will do a lot of talks to students and such.

Remember, I was planning to make some moves in coal before I found Pabrai-so he is not leading me down a primrose path-but providing me with some insight as to how a very long-term investor thinks about such an investment.

So, an update on "Spock the Coal Magnate"

I established my base position in 4 coal companies on Monday and Tuesday. These 4 are the most commonly mentioned and credible ones and they are not any penny stocks and such.

My coal position as initially established constitutes about 11 and a half percent of my portfolio. Obviously, I am way overweight on coal, but as Pabrai said-they are so cheap and I am happy with it. And, really, one of the companies pays a decent dividend so it fits the profile of a company I would own anyway-so I am not really taking a flyer on that one. One of the others does not pay a dividend and the other 2 pay a dividend of less than 1%.

Disclaimer: I am not an economist, not do I have a great deal of background in energy economics. I do think I understand better than a lot of people how energy works, and that prompts this comment.

While I agree there could be some upside to coal over the next 50 years, I think there is far greater upside in liquid natural gas. We're producing (and mostly exporting) it like crazy, and the demand in Europe is huge and increasing.

mrkelley23 wrote: ↑

Wed Mar 12, 2025 1:49 pm

Disclaimer: I am not an economist, not do I have a great deal of background in energy economics. I do think I understand better than a lot of people how energy works, and that prompts this comment.

While I agree there could be some upside to coal over the next 50 years, I think there is far greater upside in liquid natural gas. We're producing (and mostly exporting) it like crazy, and the demand in Europe is huge and increasing.

One tidbit I remember about liquid natural gas is that 20 years ago (or so) companies like Cheniere were building terminals to import LNG and then after all the shale gas/oil was found these terminals were reversed to export LNG.

20 years ago (or so) nobody predicted that we would be swimming in Nat Gas.

Re-Coal

I think the main factor that will work in my favor long-term is that, considering the randomness of when I chose to make the move, I was very fortunate in my timing. I bought the shares at roughly the same price as they sold for 2 years ago. In the interim, the share prices rose by a lot (over double) in most cases and have since dropped back.

I will have some interesting (to me) decisions to make regarding the disposition of dividends and whether I sell half the shares if/when the share price doubles. These decisions are complicated by the high-risk (possibly somewhat mitigated by the fortunate timing) and possibly high reward nature of the investment in the coal business.

I love working with weighted averages and I found a fun (to me) way to work with them. Since everybody (CNBC, Bloomberg et al) talks about Nvidia basically nonstop and hardly ever mention coal; I decided to keep a long-term comparison of what an investment in Nvidia made on the same days as my coal investments would do.

Interestingly, this comparison is as favorable to Nvidia as it is possible to be as Nvidia shares hit their 6 month (or so) lows during the period when most of the coal shares were purchased. They since rose and have come back down some

So I came up with a weighted average (yay-me) price for Nvidia based on the closing price for the days I bought coal stocks-ie if I bought 40% of my coal investment on a certain day, that day got a 40% weighting in the final share price.

I came up with a price of $110.83 for the weighted average Nvidia share price. Also since Nvidia pays a one cent dividend per quarter-this Nvidia price will drop by one cent per quarter to account for the dividend.

Given that Nvidia closed today at $111.49; this shows a point 6 percent (.6%) gain for Nvidia over the study period.

Conversely, at market's close today-the gain for coal over the study period was 3.2%.

And, yes, I would have been honest if coal had shown a loss-because I really don't care about 3 weeks-but it is fun to do.

Today, was a pretty good day for coal stocks.

With Monday being the end of quarter-you might see an update then.

Actually, you get an update sooner than Monday.

I had fun putting together a pretty complex (for me) spreadsheet-so I can track the coal conurbation results (coal conglomerate?)in total and the results for each of the 4 coal companies individually so I did another test of it.

After the really hard down day on Friday-a hypothetical investment in everybody's darling Nvidia made the same days as the coal investments would have been down 1.64% and the actual coal conurbation investment was down point 38 percent (.38%).

Stand by for first quarter results on Monday. Actually, only 3 weeks-but it seems longer than that.

Don't worry, I won't post this more than quarterly.

As of the close of Q1 2025, a hypothetical investment in NVDA made the same day as my actual coal investments would be sitting at a negative 2.8% (-2.8%) and the coal investment is down a negative 1.3% (-1.3%).

Spock wrote: ↑

Mon Mar 31, 2025 4:01 pm

Don't worry, I won't post this more than quarterly.

As of the close of Q1 2025, a hypothetical investment in NVDA made the same day as my actual coal investments would be sitting at a negative 2.8% (-2.8%) and the coal investment is down a negative 1.3% (-1.3%).

I bought 100 shares at $5.2x. It split 10:1. I sold my remaining 200 shares at $140 and change.