Out Fox The $treet

The new proposed rules by the Environmental Protection Agency, or EPA, have far reaching impacts on coal used by power plants to produce electricity. It doesn't, however, impact coal used for steel and especially that exported to foreign locations. Based on this news, the large 10% decline by Walter Energy ( NYSE: WLT     ) is perplexing considering the coal miner is almost completely focused on the metallurgical export market. With the recently released first-quarter results, the company has plenty of issues outside the EPA. From a China slowdown to an oversupplied metallurgical coal market, the company has plunged to new low after new low. Ironically, the ruling has a greater impact on  Peabody Energy ( NYSE: BTU     ) and the majority of stocks in the Market Vectors Coal ETF , which ended up virtually flat the day of the ruling. The reaction is very suggestive of a market overly negative on Walter Energy and fellow met coal leader Alpha Nat...

The coal sector continues to be hammered with declining prices and lower margins, causing some large miners to continuously report losses. In the case of Alpha Natural Resources ( NYSE: ANR     ) , the metallurgical-focused miner is facing lower pricing for the prime coal used to produce steel. Its most recent earnings report showed that the company generated a very shocking profit, however. At first glance, Alpha Natural suggested that the company produced first quarter 2014 revenue of $1.1 billion and adjusted EBITDA of $289 million. Considering the weaker metallurgical coal markets and that the company only made an adjusted EBITDA of $71.4 million in the prior quarter, these numbers seemed off. After quickly reviewing the details, the gains were based on an asset transaction that was clearly too good to be true. Read full article here . Disclosure: Long ANR. Pleas read this disclaimer page for more details.

After another weak earnings report, it appears that Arch Coal ( NYSE: ACI     ) may never regain momentum. The coal miner can't seem to catch a break with domestic thermal coal demand improving, but the high dollar metallurgical coal market plunging to new lows. Arch Coal remains one of the largest domestic coal producers with a target of selling at least 130 million tons during 2014. Unfortunately, a rebound in one segment is being met by a loss in another segment. The company is suffering substantial losses, bringing up doubts of whether a strong enough rebound will occur. Read the full article here . Disclosure: Long ANR. Please review the disclaimer page for more details. 

The recent IPO of Rice Energy ( NYSE: RICE     ) brought investors an exploration and production firm with substantial growth in the Marcellus shale. With all of the hype recently on cloud software and biotech stocks, the company hasn't gotten the deserved attention. Rice Energy is a unique energy firm that claims to be the first of the shale generation with the youngest management team in the industry. The company has a highly concentrated acreage position in the core areas of the Marcellus and Utica. Read the full article here . Disclosure: Long ANR. Please review the disclaimer page for more details. 

With Bank of America issuing a negative report on metallurgical coal, Walter Energy ( NYSE: WLT     ) slumped 20% on the news. The analyst was also bearish on other met coal producers including Alpha Natural Resources ( NYSE: ANR     ) and Arch Coal ( NYSE: ACI     ) . Typically a beaten down stock would grab some interest in the market, but in the case of Walter Energy, recent debt financings and weak prices for met coal make it questionable whether the stock will rebound. Walter Energy is the largest pure play, met coal miner in North America with operations primarily in Alabama and Canada. The stock was a poster child for the booming commodity sector back in 2011 when it soared to over $140 on relentless demand from China. Now, the stock has a prominent firm placing a $2 target on the stock. Read the full article here . Disclosure: Long ANR. Please review the disclaimer page for more details. 

After weak met coal guidance from Alpha Natural Resources ( NYSE: ANR     ) and Arch Coal ( NYSE: ACI     ) , Walter Energy ( NYSE: WLT     ) surprised the market with bullish commentary on the coal needed for steel production. Walter Energy is the largest pure-play met coal miner trading on the domestic stock exchanges. After closing another thermal coal mine, the company expects to only produce 300,000 tons of thermal coal this year, leaving the sole thrust on met coal. Other domestic coal miners produce met coal along with sizable amounts of thermal coal used for electricity production. Read the full article here . Disclosure: Please review the disclaimer page for more details. 

The biggest beneficiary of plunging natural gas inventories might not be a company in the natural gas industry. The coal industry took a big hit due to the suddenly abundant and cheap energy source developed over the last decade. Coal stocks are arguably among the most hated stocks on the planet. Stocks such as Peabody Energy ( NYSE: BTU     ) and Arch Coal   ( NYSE: ACI     ) will benefit, however, the most from a switch back to coal as a fuel source for electricity production. Alpha Natural Resources ( NYSE: ANR     ) might provide the most upside, especially if investors see a global rebound that increases the demand for metallurgical coal used in steel production. In general, the sector has been crushed so much in the last couple of years that any snap-back in demand will raise all the stocks in the sector. Read the full article here . Disclosure: Long ANR. Please review the disclaimer page for more details. 

After another week of bearish natural gas reports, most coal stocks were hit by negative analyst reports. Even though a lot of the news suggests a more bullish environment for coal, the market isn't finding the stocks appealing. The quarterly coal report from the EIA and the weekly natural gas inventory report should remind investors that not only is coal still alive, but it could have a surprisingly strong future. Domestic focused producers in the Western U.S. and Illinois Basin will benefit the most, providing some upside potential for Cloud Peak Energy ( NYSE: CLD     ),  Arch Resources ( NYSE: ACI     ), and Alpha Natural Resources ( NYSE: ANR     ). Read the full article here . Disclosure: Long ANR. Please review the disclaimer page for more details. 

Even after reporting further loses and weak pricing in the met coal market, Alpha Natural Resources (ANR) has formed a beautiful chart. Won't ever claim to be a technical expert, but this chart shows consolidation for a year and an eventual rise above the 200ema. When a stock starts breaking above the moving averages and the news isn't overly bullish, its a good sign that the momentum has turned in the stock. The sellers are done for the time being. Everybody needs to remember that Alpha Natural has very significant and valuable met coal assets. At this point, its just a matter of rationalizing supply and demand to get prices higher. These resources will be valuable again at some point. Disclosure: Long ANR. Please review the disclaimer page for more details. 

Though the stocks haven’t traded well the last couple of days, costs cuts have improved the potential for rebounds in both Peabody Energy (NYSE: BTU ) and Walter Energy (NYSE: WLT ) . Peabody easily smashed estimates while Walter provided hope that a liquidity crisis wouldn’t smash the stock. Coal stocks trade at multi-year lows as falling commodity prices have hit revenues, but now the companies have been able to drastically more » Disclosure: Long ANR. Please read the full disclaimer page for more details. 

A typical headline such as the above usually signals a stock that has an absurdly high valuation and that is due for a correction. In the case of Walter Energy (NYSE: WLT ) , the amazing part is how low the market cap has dropped. This stock was a poster child of the commodity boom and has collapsed around 90% in just over two years. The company is seen as the “pure more » Disclosure: Long ANR. Please review the disclaimer page for more details. 

Though coal could not be more hated and analysts expect years of losses at Alpha Natural Resources ( ANR ) , this might actually be the time for the stock. As written last month (see Is The Coal Supercycle Back? ), the coal super cycle could be intact so investors need to keep an eye on this sector. The world's third-leading producer of metallurgical coal faces a tough road ahead due to pricing impacted by structural changes for CAPP thermal coal and weak global demand for metallurgical coal. As with any commodity, the market can be very cyclical and volatile providing opportunities to invest at periods of severe weakness. The company has been in a continuous restructuring mode for several years now allowing it to dramatically reduce costs for the next up cycle. Now might be the time to move back into Alpha Natural. Read the full article at Seeking Alpha. Disclosure: Long ANR. Please review the disclaimer page for more details. 

After reading the quarterly report for Peabody Energy ( BTU ), one has to wonder if the coal supercycle is back. A few years back the CEO proclaimed that coal had begun a long-term surge in demand yet the stock began a major slump as new mines and higher costs caused profits to plummet. As US investors remain focused on last year's domestic switch to natural gas from thermal coal, the global demand for coal remains as strong as ever. One major theme highlights the global demand picture for coal. Where alternative fuel prices are cheap, consumers prefer that source whether natural gas, nuclear, or alternative fuels. In the cases where alternatives don't exist or are no longer deemed appealing, coal demand is set to grow dramatically. The situation in the US is incorrectly framed as a preference for a cleaner alternative to coal, but the scenario might see a dramatic shift as natural gas prices soar in 2013. Read the full article at Seeking Alpha. Disclosu...

This model lost a disappointing 6.6% in July versus a 1.3% gain for the benchmark S&P 500. This model typical outpaces the major indices by a large margin in up periods so the last month was a major exception. Since the end of 2011, this model has been running on the theme that the majority of stocks would retrace the losses experienced since the July 2011 levels. In essence, our theory all along has been any losses since that time period were from irrational fear of a second financial collapse that the Europeans were unlikely to allow. Naturally this fluctuates on a case by case basis where any individual stock could move a lot higher or lower depending on circumstances since then. Unfortunately this theory took a major hit as investors piled into dividend paying stocks sending most major indices back close to 2012 highs while at the same time selling the higher risk, global growth stocks. In some cases, stocks actually hit new 52 week lows recently. T...

May was one of the worst months on record for the major averages with a decline of more than 6% for the Russell 1000. Not only was the decline severe for the major averages, but numerous individual stocks in the index dropped more than 25%. In fact MEMC Electronic (WFR) and Green Mountain Coffee (GMCR) were crushed over 50%. The key now is to determine if these drops were justified or if the sell off presents a buying opportunity. Bespoke Investments prepared the below list of the worst performing Russell 1000 stocks in May. Read the full article at Seeking Alpha. Disclosure: Long ANR. Please read the disclaimer page for more details. 

This model lost a disappointing 5.8% in March versus a 3.1% gain for the benchmark S&P 500. This model typical outpaces the major indices by a large margin in up periods so the last month was a major exception. Since the end of 2011, this model has been running on the theme that the majority of stocks would retrace the losses experienced since the July 2011 levels. In essence, our theory all along has been any losses since that time period were from irrational fear of a second financial collapse that the Europeans were unlikely to allow. Naturally this fluctuates on a case by case basis where any individual stock could move a lot higher or lower depending on circumstances since then. Unfortunately this theory took a major turn in March as investors piled into dividend paying stocks sending most major indices higher while at the same time selling the higher risk, global growth stocks. In some cases, it was just a small reversal of the gains from the last couple of ...

Last week, the market presented some major signs of the beginning stage of a recovery in the construction sector. First, railroad shipments of lumber and crushed stone increased dramatically. Second, PPG Industries (PPG) reported blowout earnings in part due to a recovery in the US construction market. While most construction related stocks have already had a run, most are no where near multi year highs. Several options exist for playing the construction recovery. The main debate is whether to focus on US based companies that will benefit solely from the rebound in US construction or globally based companies that will benefit from the largest two economies (US and China) rebounding at the same time. Read the full article at Seeking Alpha. Disclosure: Long ANR, FCX, SHLD, and TEX. Please review the disclaimer page for more details. 

According to this Reuters report on CNBC, iron ore demand is set to grow at 11% through 2017. Wait, didn't stocks initially plunge today due to fears of slower demand in China for iron ore? Talk about a confusing market with conflicting currents in the news. The actual news from BHP Billiton (BHP) today was that demand from China was "flattening" or otherwise growing in the mid single digits versus the double digit growth of the past decade. Slower growth, but still growth. How this is news was beyond me. Everybody should know by now that China wants slower growth. Stocks like Alpha Natural Resources (ANR) are down some 75% since early 2011 peaks. The market has already harshly punished this met coal producer to the extreme making the initial 6% drop further signs of a bottom. Remember that met coal is used with iron ore to produce steel. So now basically within 24 hours the media is spinning out reports of massive growth in iron ore demand and the expectations f...

This model gained a solid 21.4% in February versus 4.1% for the benchmark S&P 500. This model typical outpaces the major indices by a large margin in up periods and last month was no exception. Since the end of 2011, this model has been running on the theme that the majority of stocks would retrace the losses experienced since the July 2011 levels. In essence, our theory all along has been any losses since that time period were from irrational fear of a second financial collapse that the Europeans were unlikely to allow. Naturally this fluctuates on a case by case basis where any individual stock could move a lot higher or lower depending on circumstances since then. This conviction has allowed us to hold onto a highly leveraged portfolio and see significant gains this year as stocks like Apple (AAPL) , Dicks Sporting Goods (DKS) , Liz Claiborne (LIZ) , and Radware (RDWR) all reached those July levels by February. Other stocks like Manitowoc (MTW), Sears Hold...

After a not so surprising weak Q4'11 report, coal miner Alpha Natural Resources (ANR) started trading down nearly 5% today. It didn't take long for the stock to reverse and is now trading up nearly 3%. It really isn't worth focusing on the earnings report. Alpha Natural is a long term trade on the increasing demand for met coal in countries like China and India. The low cost of natural gas is having a dramatic impact on thermal coal pricing and demand placing serious margin pressure on Alpha Natural. Since it is all temporarily, it just isn't worth the effort. Nat gas prices will eventually rise and China appears to be storming back. Normalized earnings will be the key going forward. More importantly today was the major reversal that has a tendancy to signal a bottom in the stock. With the major support now put in around $20, longs have a basis for being more aggressive. If the stock can break above the channel around $22.50, longs will get very aggressive. ...