Out Fox The $treet

Anybody not under a rock that follows the financial world has heard about the proposed plans in Australia to tax mining profits by 40%. Not but a few weeks old and we've already seen several signs of the unintended consequences of the taxes. First, BHP Biliton CEO discussed the likelihood of putting projects on hold. Second, Peabody Energy (BTU) lowered its bid for MacArthur Coal in Australia. Stone Fox Capital's read: Buy companies with assets outside Australia in particular we've bought Freeport-McMoRan (FCX), Massey Energy (MEE), and US Steel (X). More on them later. Our reasoning is that the tax will limit the supply especially from new projects in Australia with limited impact to demand. It clearly makes assets outside Australia more attractive. In the end, the announcements this weekend could go a long way to pressure the government to ratchet back the tax plans. It clearly places short term risk around projects. BHP CEO Kloppers made it clear over the weekend that th...

U.S. Steel (X) reported a dismal Q today. Revenue handily beat estimates ($3.4B vs $3.1B) yet earnings missed consensus numbers. All while competitors Nucor (NUE) and AK Steel (AKS) both easily beat number and reported profits. If that wasn't discouraging enough, X forecast that Q1 would be similar to Q4 while analysts (us too) expected a much improved number. Evidently input costs such as coking coal have increased much more then prices. This could be partially because of the demand in China. All in all, this tells us to stay with the Alpha Natural Resources (ANR) and the new pick in Puda Coal (PUDA). The coking coal companies seem able to benefit from the rising demand without the rising supply. Key line from the report: "We expect to report an overall first-quarter 2010 operating loss in line with the fourth-quarter 2009 as gradually improving business conditions are not yet fully reflected in our operating results," said Chairman and Chief Executive Officer John Surma...

Just trimmed our position in US Steel (X) in the Growth Portfolio by 400 shares or about 40% of our position. Mainly just a trading move as X has become extended trading at roughly 20% over the 20EMA and the 14 day RSI is at 82. Numbers that usually alert to near term tops. We'll look to add back this position around the 20EMA currently at $49.50.

After what as been a weak last 4-5 days in the materials sector, its interesting to see that U.S. Steel (X) closed at recent highs. Some bullish news from the demand in China helped. Now X did trade at around $50 back in September so that will be the next resistance area before we have a major breakout. Its important to remember that X traded at $180 last year so its still some 60% below that high. X is one of our larger holdings in the Growth Portfolio. 2:07PM U.S. Steel notches a fresh session high of 46.30, hovering slightly under its Dec/two month high at 46.40 ( X ) 46.27 +2.04 : (closed at 46.74)