Edge Seven Financial Sydney Blog 03

New Hope Corporation – Hope for Commodities

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

Ethical Consideration

I have spent a lot of time considering the ethical aspect of this investment.
My rationale:
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.

Weekly chart - click to enlarge

Weekly chart – click to enlarge

Daily chart - click to enlarge

Daily chart – click to enlarge

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.

The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.

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