Why Alpha Natural Resources' Shares Plunged
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of coal producer Alpha Natural Resources (NYS: ANR) fell more than 10% today to a new 52-week low after a former coal investor gave the industry a thumbs-down.
So what: Billionaire Wilbur Ross, who built a coal company that he sold for $3.4 billion last year, said that the industry was in for a long road ahead due to the natural gas shale boom. He said that the current down cycle is structurally different than previous declines in the industry and the unfavorable conditions will be here for years to come.
Now what: Last week Patriot Coal filed for bankruptcy, another sign that the industry is in serious trouble, and with a big-time investor saying that the pain would last, investors fled coal. Given weakness in both the thermal and metallurgical industries I don't see a reason to buy coal stocks here because there will likely be more failures before the industry turns around. Unless I see sustainable profits I'm not betting on coal -- I'd rather be in emerging energy sources than old energy sources right now.
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The article Why Alpha Natural Resources' Shares Plunged originally appeared on Fool.com.Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.