For the past 6,000 years, coal has been useful to society. Its use has been seen in ancient Rome, the Aztec empire and in China during the Bronze age.
The question is not whether coal will survive, but a company that extracts it.
As witnessed in its 1-star earnings predictability rank, Alpha Natural Resources (ANR, Financial) is going through rocky times.
Commodity cycles are natural. They occur because of the basic supply and demand requirements of a society. As seen in the gross margin, ANR and the entire coal industry is experiencing a downward cycle.
The cycle is so bad that Alpha Natural Resources has seen -30% margins. Can ANR withstand this commodity cycle downturn?
Witnessed by a declining price compared to revenue, ANR shareholders are fearful of the company's future. As the EPA continues its pressure on the industry in addition to the competition of "cleaner" energy alternates, the market is bidding less and less for ANR revenue.
Seen in the P/S ratio, each $1.00 of ANR revenue is priced at only $0.10. The stock investors are fearful.
It is one thing when stockholders get fearful, but a whole other story when bondholders do.
As witnessed by the high yield to maturity of ANR's 2017 convertible bond, the bondholders do not have much faith this company will survive either.
Often times, when an industry experiences a downturn, the "smart money" starts trading. As witnessed in the massive insider sell, there was a large amount of company stock changing hands.
Remember, for every seller there is a buyer, and only one side comes out ahead. Analyzing who the "smart money" is is essential. Identifying those insiders with a profitable track record of investing can make our job easier. As simple as it seems, however, when one party is using company stock as currency, it can often be difficult to determine who that smart money is.
Gurufocus's insider buying feature assists in showing who that insider is and what "currency" that insider is paying with. Knowing this information puts us on the side of the smart money.
Thanks to Gurufocus for providing the interactive charts.
