New Hope Corporation Limited (ASX: NHC) is a coal producer that operates two coal mines in Queensland. The company has a 60 year history.
New Hope triggered a buy for me this week. Here is why….
New Hope Fundamentals:
1. Profitable coal producer
2. Aussie Coal is the cleanest in the world
3. Asian coal demand forecast to double by the year 2035
4. Coal mines are closing despite demand increasing = higher coal prices
4. New Hope is cash flow positive even at low coal prices
4. Good manager (Robert Millner) – He is an excellent long term investor
5. $1.21 cash backing per share (over $1 billion in the bank)
6. Fully franked dividend payer
I have spent a lot of time considering the ethical aspect of this investment.
1. Shareholder or not, this business will still be digging coal out of the ground.
2. Hypocrisy to suggest this unethical if using electricity at home or work.
3. No economically sustainable electricity generating substitute in Asia.
New Hope Technicals:
1. New Hope this week broke a four year downtrend.
2. The probability of good things happening for the share price have increased.
Macro counter-intuitive play
1. Aunty Janet Yellen (Fed Reserve Chair) will raise rates before too long.
2. Raising rates is an inflationary move in the context of the business cycle.
3. This is likely to be good for commodities.
4. Not in love with the downside for commodities from here (that trade is done).
11 December 2015 Update
Well that was a ‘Hope-Less’ call. Probability of good things happening reduced today (Friday) with a breach of the trendline back at $1.90 area. My system dictates I close this for a loss which I have done and see what happens. Faked out on this one but got to stay in control.
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