Sunday December 17, 2017

ACI- Hot Penny Stocks

A.J. Watkinson January 21, 2013 Hot Penny Stocks No Comments
ACI- Hot Penny Stocks

Hot Penny Stocks are all about volume.  Big Volume!

This week’s Hot Penny Stock is: Arch Coal (ACI)

Arch Coal is a top five U.S.-based global coal producer.  Arch is also one of the most diversified American coal companies, with mining complexes across every major U.S. coal supply basin.  ACI’s core business is supplying cleaner-burning, low-sulfur thermal and metallurgical coal to power generators and steel manufacturers on five continents.

Arch Coal has been hit hard by low natural gas prices, posting some of the worst stock returns in the thermal coal industry. For reference, shares were trading up near $35 in 2011…

As you’ll recall, cheaper natural gas is causing electric utilities to move from coal for electricity generation. The economics of natural gas make thermal coal less attractive.

On Friday last week, Arch Coal jumped over 10% on volume of nearly 31 million shares.  In comparison, the 3 month moving average is just 13 million.  That’s more than double the normal volume of shares changing hands.

So why the surge in volume?

It’s probably for a handful of reasons. First, last Friday was normal January options expiration as well as LEAP options expiry. That certainly can add to trading volume on the stock for hedging purposes.

In addition, natural gas prices appear to be back on the way up to test the $4 level. More expensive natural gas could keep utility providers burning coal a little longer, prompting some investors to buy the stock.

Finally, Arch will post earnings results in a couple of weeks on February 5th. Investors may be positioning in anticipation of better than expected earnings.

The verdict?

While shares of Arch look attractively priced when looking back to last year’s chart, I suggest you pass on the stock.  Even though ACI shares sport an attractive price/book ratio of just 0.45x, the short-term earnings forecasts are bleak at best.  For the fourth quarter of 2012, estimates are for a loss of $0.13 a share, with it falling further next quarter to a loss of $0.20 (consensus averages).

More importantly, the future of coal as the primary choice of utility providers is unclear.  Certainly if natural gas prices rise well over $4, coal will remain in play.  But odds are, with supply set to return to maximum levels over summer months, prices of natural gas should fall back toward the $3 level or lower… and coal will appear expensive on a relative basis.

Keeping you one step ahead,




A.J. Watkinson

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About The Author

A.J cut his teeth while working for more than 12 years on the corporate side of the financial services industry in the suburbs of New York City. In addition, A.J. has successfully traded stocks, options and currencies as an independent trader since the late 90's. Eventually A.J. moved out of the "rat race", landing in North Scottsdale, Arizona. During the past few years, he's worked as the editor of a number of high profile financial newsletters. In this role, he's run trading services for penny stocks, options, currencies, ETFs, and FOREX. While under his direction, each of these trading services had turned in positive performance... something very rare in the financial newsletter industry. In addition, he's been a regular contributor to a number of financial websites- writing under multiple pen names. A.J.'s current goal is to share his real world experiences and success (and failures) in the various financial markets to help others not only make money- but avoid losing it. It's this vision and passion that has led A.J. to launch Most of all, A.J. hopes to keep the little guy from getting caught up in the highly unscrupulous penny stock pump and dump scene.

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