Not dead, just resting…

  • Buy low…
  • Rare as…

From The Australian Financial Review:

Australia is “denying gravity” by continuing to encourage coal investments because renewable energy is now competing “head to head” with coal on cost, the global head of BlackRock’s infrastructure investment group, Jim Barry, says.

“It’s been amusing sitting back and watching Australia from afar because in effect it’s been denying gravity,” Mr Barry, who is based in Dublin, told the Australian Financial Review.

The report continues, quoting Mr Barry:

“Coal is dead. That’s not to say all the coal plants are going to shut tomorrow. But anyone who’s looking to take beyond a 10-year view on coal is gambling very significantly.

Ah, we love a definitive view — coal is dead.

Of course, being the contrarian that we are, we might argue that looking beyond a 10-year view on alternative fuels is a gamble too.

In fact, we might argue (if we were the argumentative type) that alternative fuels are a bigger gamble than coal.

After all, for all its dirtiness, we know that coal works, and that it’s effective as a fuel. And we know it’s reliable. It’s not dependent on weather conditions.

It’s scalable, and is responsive to demand. Burn less coal when demand for electricity is low. Burn more coal when demand for electricity is high.

Anyway, Mr Barry could be right. It could be the end of coal. But, then again, folks (former British PM Margaret Thatcher, for one) thought the same thing in the mid-1980s. Since then, coal demand has doubled:



chart image

Source: BP
Click to enlarge


Who’s to say that, after the current lull, it won’t double again?

Markets

Overnight, the Dow Jones Industrial Average closed up 70.53 points, or 0.34%.

The S&P 500 gained 10.68 points, or 0.44%.

In Europe, the Euro Stoxx 50 index fell 2.07 points, for a 0.06% fall. Meanwhile, the FTSE 100 gained 0.04%, and Germany’s DAX index fell 0.17%.

In Asian markets, Japan’s Nikkei 225 index is down 97.08 points, or 0.49%. China’s CSI 300 is down 0.22%.

In Australia, the S&P/ASX 200 is down 39.33 points, or 0.68%.

On the commodities markets, West Texas Intermediate crude oil is US$48.55 per barrel. Brent crude is US$51.20 per barrel.

Gold is trading for US$1,258.53 (AU$1,692.94) per troy ounce. Silver is US$17.19 (AU$23.13) per troy ounce.

The Aussie dollar is worth 74.34 US cents.

Buy low…

If the idea is to buy low and sell high, the VanEck Vectors Coal ETF [NYSEARCA:KOL] must surely fit the bill of a ‘buy low’ opportunity.

The stock price has more than doubled since early 2016. Yet it’s still down 74.8% since the 2011 peak.



chart image

Source: Bloomberg
Click to enlarge


Coal is dead…apparently. It could very well be dead. Or it could be a contrarian investor’s dream buy.

We’ll track it with a keen interest.

Rare as…

We’ve banged on about initial public offerings (IPOs) in recent days.

[Reader’s voice: No, you don’t say!]

But we’ve done so for good reason.

While an IPO is just the listing of a company’s shares, it’s not just a share listing.

It’s not just about buying shares.

If it was, we’d tell you not to fuss about it. After all, there are some 2,000 stocks listed on the Australian Securities Exchange.

If you really just want to buy and sell shares, check out the 2,000 listed stocks. There are no restrictions on buying those. It’s easy. Open your brokerage account. Make sure you have cash available to settle the trade, and then buy the shares.

There really isn’t much to it at all.

IPOs, on the other hand, are different.

You can’t just take your pick about which IPO shares to buy.

There aren’t 2,000 or more of them to choose from.

And unlike a regular stock, which you can access through an online broking account, IPO stocks (the good ones, anyway) are the preserve of the well-connected and wealthy.

By IPOs, we’re not talking about the big listings, like Myer Holdings Ltd [ASX:MYR], Medibank Private Ltd [ASX:MPL], or Telstra Corporation Ltd [ASX:TLS].

Pretty much anyone could get hold of those IPO shares if they wanted them.

But how many Aussies had a realistic chance of getting in on an IPO listing?

The answer: Not many.

Consider this. In an average calendar month, more than $4 billion-worth of BHP Billiton Ltd [ASX:BHP] shares change hands. That’s for one company, in one month.

Remember that number.

Over the last 12 months, the total value of IPO shares issued has been just $4.98 billion.

If you took the four most popularly-traded stocks on the ASX, and added up the value of shares traded, within a week it would exceed the value of the last 12 months of IPOs.

You get the point?

The IPO market is off limits for most people.

Let me put it another way. The typical minimum investment in an IPO is $2,000. If you tried to give as many people as possible the minimum investment amount in IPOs over the past year, a maximum of 2.5 million investors would be able to take part.

That may sound like a lot, but when you consider that the lion’s share of most IPOs goes to existing shareholders, company insiders, wealthy connections, fund managers and so on, the reality is that there are few shares left over for regular investors.

In fact, most of the time, there aren’t any shares left over at all.

And that isn’t the end of it either.

Many novice investors assume that all IPOs are great…if only they could get in on them. Unfortunately, that’s not true. Many IPOs are duds.

Often, they’re companies where the owners have grown the business as much as they can, and so now they just want to offload it to any old ‘mug investor’.

So, with all the IPOs that have come on the market over the past 12 months (106 that have listed), perhaps fewer than half of them are any good.

So if we go back to the numbers I gave you above, cut those in half. There may very well have been nearly $5 billion in IPOs, but perhaps less than $2.5 billion-worth was worthy of investment.

Again, I’m sure you can see just how difficult this market can be…if you don’t have the right guidance.

It’s one thing to get access to the IPO market…it’s another thing to know which deal is worth buying.

That’s where Greg Canavan’s Exclusive IPO Investor service plans to hit the mark.

Greg doesn’t plan on getting folks into 106 deals over the next year. Greg plans to help folks get into maybe four, five, six, or maybe even eight, deals per year.

Greg will use his extensive network of contacts, and apply his rigorous research methodology, to find what he believes are the cream of the crop when it comes to IPOs.

That means being able to tell one of his contacts that he’s not interested if something doesn’t stack up. And it means telling you all about an opportunity and showing you how to secure an allocation of shares, if it does stack up.

And believe me, while IPO investing can be lucrative — just ask punters who snagged shares in the Aurora Labs Ltd [ASX:A3D] IPO, up 625% in 11 months — it can be a minefield if you don’t have the right advice.

As The Australian Financial Review reports:

A 78-year-old retiree who has seen the value of his shares in SurfStitch Group plunge 92 per cent is the lead plaintiff in a $100 million class action claim.

Warwick Cook and his wife Leonee bought their first 5000 shares in SurfStitch in November 2015, paying $2.12 a share, more than double SurfStitch’s issue price less than 12 months earlier.

Surfstitch Group Ltd [ASX:SRF] listed at $1 in December 2014. The shares last traded at 6.8 cents on Tuesday.

That’s what we mean about getting good advice. Anyone can buy shares. But are you getting the best advice?

And when it comes to IPOs, even though not everyone can buy them, good advice still counts.

That’s why we’re so excited about Greg Canavan’s Exclusive IPO Investor. Details here.

The name of the service is self-explanatory. Greg isn’t interested in any old IPO. Greg’s only looking at what he believes to be the best IPOs — the IPOs generally not available to the public.

The IPOs tailor-made for the insiders and the well-connected wealthy.

Greg’s a realist. He can’t guarantee that every IPO he backs will deliver big returns like Aurora Labs. But those are the gains he’s looking for.

In fact, Greg’s first deal is an upcoming IPO that he believes could result in multi-digit-percentage gains. That’s exciting. Check it out. Go here.

Cheers,
Kris