Sunday, May 22, 2016

How markets can be very wrong

I had in previous post already mentioned names of several commodity companies Peabody Energy and Arch Coal. The graph on LA Times about Electricity produced from coal in the state of California is reproduced below:

It is clearly visible that something drastically changed in 2011 and the coal based electricity production fell off a cliff. The charts of both the companies' stock price is shown below:

Both the shares were trading at much higher prices in 2011 ($3250 for Arch Coal trading at $0.36 now, $72 for Peabody trading at $0.95 now) that means the market was not discounting the event of replacing coal with other cheaper options for producing electricity. Both the company's filed for bankruptcy recently.

How can market be right in 2011?
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1 comment:

KKR said...

It is a old post. But it looks like we are travelling on that boat. Holding NTPC is not right due to falling CUF and more refurbishment of Coal power plants.

We dont have Natural gas based plants like California, so How long Coal India can survive. We have growin population whereas California is almost stagnated population.

Pl share your vies on NTPC and Coal India.

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