More than ever before, successful investing requires excellent vision -- so please, check that prescription and keep those Foolish lenses clean. Fools hopefully see the forest for the trees, and if they look long and hard they can also distinguish between near-term market dislocations and long-term fundamentals. As we'll see below, Jim Cramer doesn't own a pair of Foolish lenses.
Echoing the resounding theme of this third-quarter earnings season, Arch Coal
Arch's net earnings tripled over the prior year's three-month and nine-month periods, setting the stage for record 2008 results. Compared with the second quarter, way back when coal was a runaway profit train and Arch shares traded for four times their present value, average coal sales prices dropped by only 3%. Although the Powder River Basin segment dragged overall margins down by 11% sequentially, prices for Central Appalachian coal actually increased substantially over the second quarter.
Predictably, despite the obvious disconnect between this earnings performance and recent share performance, Arch's adjusted guidance yielded a barrage of headlines that failed to convey the important story. With the news wires warning of "dwindling demand," and Jim Cramer pronouncing the end of Arch's reign, it's no wonder Fools are questioning their own unique perspectives on this industry.
Here's the point
Within its earnings statement, though, Arch offered a headline of its own that might as well have been pulled from any of my recent articles: "long-term market fundamentals remain intact despite near-term trends." Competitors Peabody Energy
For Fools who continue to look carefully, that disconnect is not only visible, but indicative of a sector ripe with investment opportunities.
The "Coal" tag within the Motley Fool CAPS community lists 22 coal companies. Find out what other investors are saying about the stocks you're watching, or share your Foolish thoughts with us. CAPS is free and fun!
Fool contributor Christopher Barker has enjoyed some great rock climbing trips in Appalachian coal country and hopes the industry will exercise environmental restraint. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Arch Coal, Market Vectors Coal ETF, and Peabody Energy. The Motley Fool has a disclosure policy.
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