I like coal, but love Massey Energy
Massey Energy is one of the great plays on coal for numerous reasons. The growth rates the company posts are out of this world, its position in low sulfur or clean coal technologies is second to none and its poised to do well both as coal prices rise and the world population becomes more interested in clean technologies. Not to mention that it has a heavy stake in the sale of metallurgical coal, or coal that is clean enough to use for the creation and preparation of steel. Positioning in metallurgical coal also means a position in emerging markets and steel. Higher prices for steel means higher prices for its coal.
The stock has tanked over the past few months in a tight downturn. Mutual fund and institutional holdings were 93% of the total stock available according to statistics made available over the summer. With this much institutional ownership, its likely that the recent drop was comprised mainly of selling pressure resulting from higher stock prices. At $90, it would be hard to hold onto this stock unless another major quarter comes through. And since this stock has grown its EPS by 167% last quarter and 40% in the quarter prior, though mainly on higher coal and steel prices, I’m a buyer for the long term.
After this stock breaks through its current downtrend, I think this is one to buy in and hold for the long term. Right now its all about entry point, certainly I want to be an owner of this stock but only at the right price. Above $70 per share or out of the current downtrend, this stock is an absolute buy. Don’t get in too quick, or you might buy in to a long downtrend, its hard to tell when this stock will break. Short interest has dropped every settlement date starting on June 30th. As the shorts start to fall off this stock, its going to bounce, I think it will see $90 per share yet again in the coming 12 months.
Looking at the technical indicator, the relative strength index it can also be assumed that this stock, if it holds the 48-49 RSI level, will bounce nicely out of the trend. Compare to how the stock performed at all the previous touches of the 48-49 level on a weekly chart. For whatever reason this stock pivots at that level.
