Energy Crisis Looming - VALUE DISCONNECT in Coal

#myideas Sep 29, 2022
A lump of coal is pictured

There are times that I feel I am on "crazy pills" when I look at the market, the value gaps are just too huge!

For example, over the past 2 years, the price of coal, according to tradingeconomics.com, went from $50 to $480 a few months ago to $440 coal now. This is an 860% increase! The problem is, the coal companies have not caught up.

Indeed, in the recent market turmoil, they were going down like everything else, even though we're about to hit the mother of all energy crises in Europe. So on the one hand - energy crisis on top of a structural shortage due to the war. On the other hand - a recession due to higher rates. Okay. Say these two factors counter each other out. We're still left with $440 coal! The companies just have to do nothing - lock in contracts at $440 as older contracts expire over the next few years - and they earn 9x more, with perhaps only 20% operational cost increase. Their profit margins are about to explode - so why are they getting priced like coal is going out of style?

I don't get it, and this just does not make sense to me.

Guess I'm buying more coal! Disclaimer: This is not investment advice, and I own shares in a coal firm because it makes too much sense to me, unless I'm missing the big picture!

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