I don’t know how many individual investors take the time to listen in on conference calls. Listening to a call can be time consuming & I know full well that we all have a limited amount of research time. Yet, I often find conference calls very informative. Most of the time they provide more information than you’d receive if you scoured the Internet for hours researching. I highly recommend tuning into conference calls when you own a company or when you are interested in learning more about a company and/or industry.
As you may know, I have a soft spot in my investing heart for shipping stocks. While I do not currently have much of a position in the shipping sector, I do keep tabs on a few companies. One shipping company I regularly follow is Genco Shipping (GNK). Last week I listened in on a conference call they had. As it turns out, I not only gained insights into the shipping industry, but the coal industry, as well.
From the call I was able to learn that the recent flooding of Australia had reduced the country’s coal output to 1/3rd of regular levels. While I knew the floods had a signficant impact on coal mining, I did not know it was enough to drop production by 2/3rds. Interesting…
Not a big surprise, but the call also touched on the fact that India and China are hungry for coal…increasing demand. This tells me that when the mines in Australia come back to 100% the emerging markets to the north are going to come calling yet again.
Lastly, the impact of Japan’s rebuilding was touched on. Again, the discussion mentioned steel transportation to the country, which turns out to be a by-product of coal.
As you see from the notes provided above, a portion of the call focused on the transportation of energy (coal), which not only provided insights into the shipping industry, but insights into energy and construction. As with every business, a number of variables are at play. Learning about those variables and how they relate within a company or industry can greatly help you get a ‘big picture’ view of certain areas of the economy. Such views are very helpful when attempting to develop an investment strategy.
Conference calls are valuable whether you’re new or a seasoned investor. The time you spend listening can be immeasurably valuable. Not only do you get to hear company officials report on company performance and other matters, but you also get to hear other investors ask questions into the nature of the company and its future. Listen in and don’t be surprised if you gain more knowledge than you expected to receive.
Energy is once again on the front burner. Crises in the Middle East and North Africa are roiling global oil markets, and disaster in Japan set off a chain of events that once again calls into question the safety of nuclear power, an important source of electricity. The most immediate impact on most Americans is pain at the pump, with gasoline prices now more than $4 a gallon in parts of the U.S. But what’s painful for the pocketbook may also resent opportunities for investors, who can find attractive stocks in almost every segment of the energy market…READ MORE.
My Take: Interest in energy stocks is on the rise as the result of increasing energy costs. I’ve written about energy related investments on numerous occasions. The article above does a good job of providing a primer on a number of energy related investments and mixes a few specific stock recommendation in.
If you’re mad about your energy bill and need some direction as to where to invest, start with the article above.
The perception of nuclear power has taken another hit. Americans, already leery over over the thought of nuclear power, have seen their fear reinforced by the events in Japan over the past week. While fear may increase or decrease, it is almost certain that our power needs in the U.S. will grow in the near and distant future. The question that ultimately matters to you the citizen and investor is how will our power needs be met?
Approaching the question above from the position of an investor would lead me to consider what flavors of energy are palatable to the U.S. citizen. I would contend that the U.S. energy consumer is torn between 2 desires; cleanliness and price. The U.S. consumer wants to receive energy from clean sources, while being cost effective. Essentially, the best of both worlds is being asked for.
Fossil fuel based (coal and oil) are cost effective, but are not viewed as ‘clean’ sources of energy. Nuclear, while being ‘clean’ in many ways as an energy source, is seen as ‘dirty’ by the fact of its potential problems (radiation leaks and nuclear meltdown). Though fossil and nuclear fuel sources are not regarded as being clean, they are price competitive and tested sources of energy. They fulfill the pragmatic side of the U.S. consumer, yet leave his/her ‘green’ desires unfulfilled.
Solar, wind and geothermal are seen as earth friendly and aesthetically pleasing energy sources (although I find hills covered with windmills quite un-aesthetically pleasing), yet typically come with higher costs and are limited in their actual application. Solar and wind generation must overcome their variable nature and geothermal is limited to certain geographic regions. These sources of energy may help meet our needs, but they will not be the main solution.
Natural gas is uniquely positioned (particularly within the U.S.) to emerge as a mainstay of energy production. New drilling technologies and natural gas discoveries have increased the energy’s potential in the U.S. The expansion in supply has also presented the hope that gas will be able to fulfill more roles, while not jumping significantly in price. The U.S. has a lot of natural gas and natural gas is viewed by the U.S. energy consumer as a ‘clean’ source of energy. This is the match the U.S. consumer is looking for – the collision of economic realism and green energy.
As I’ve written about in a previous posting, the shift to natural gas will not happen over night. This shift will take years. Changing a factory’s energy delivery mechanism takes time and doing so for a city, state or nation will take even longer. Yet, you must remember that the market is forward looking. Thus, it is not when the plants are built that you will see investors swarm natural gas producers, drillers, providers and distributors. Investors will swarm when they know that the direction has been set have natural gas play a much more significant role in the country’s future.
Here are 4 plays on natural gas growth that you can consider when starting your research:
- Weatherford International (WFT) provides equipment and services used in the drilling, evaluation, completion, production, and intervention of oil and natural gas wells to independent oil and natural gas producing companies worldwide.
- Dorchester Minerals (DMLP) engages in the acquisition, ownership, and administration of producing and non-producing natural gas and crude oil royalty, net profits, and leasehold interests in the United States.
- Nicor (GAS) through its subsidiaries, engages in natural gas distribution business in the United States. The company distributes natural gas to approximately 2.2 million residential, commercial, and industrial customers in northern Illinois. It also provides natural gas storage and transmission-related services to marketers and other gas distribution companies.
- Schlumberger Limited (SLB) and its subsidiaries supply technology, integrated project management, and information solutions to the oil and gas industry worldwide.
Disclosure: Long WFT
If emerging markets are to grow, they will need new sources of energy. When populations are counted in the billions, slight increases in energy demand per person multiple into huge new energy requirements. Coal and Uranium are two major energy sources and they a large part of the answer to the increasing need for energy around the world.
Coal might be bashed in the Western press, but it is proven, abundant and in high demand throughout the developing world. Currently coal price are rising near 2-year highs. The spot price has risen from around $85 to $225 per metric ton. This trend does not look as if it will break down anytime soon.
Last month Caterpillar (CAT) placed an offer to buy mine equipment manufacturer (primarily coal mining), Bucyrus (BUCY) for $8.6 billion. Caterpillar made this move not only because BUCY is an excellent company, but because they foresee a steady increase in the demand for coal worldwide. Therefore, mining equipment will be more sought after as the materials being mined appreciate in value.
At the present time, China is consuming approximately half of the world’s coal while India foresees its coal consumption tripling in the next 20 years (India’s Coal Minister, Sripakash Jaiswal). To grow a person or an economy energy is needed. What the world is watching today is a landscape where many smaller players are in the process of realizing a spurt in growth.
Uranium like coal gets a lot of bad press in the West, particularly America. Uranium prices have moved above $50 from their 4 year low of nearly $40. This is significantly off its highs in 2007 of $136 per pound. What should make you interested to invest in this source of energy? China has 12 nuclear power pants with 30 more on the way to being live. A major extractor of uranium internationally, Cameco (CCJ), expects a 20% increase in nuclear reactors throughout the world within 9 years. These are bullish signs.
Where is the demand and where are those demanding looking to for their answers (supply)? In the field of energy many of the answers are being sought via coal and nuclear power. How will these two areas of investment answer the needs of your portfolio?