Monday, December 13, 2010

A Purchase Today Of CLD Will Result In A 5% Gain Shortly

I already own a full position of Cloud Peak, CLD, so I haven't added to my holdings in today's sell off. CLD is off about a dollar, 5%ish, due to an announced secondary offering by the company of most of the stock owned by the major shareholder, BHP Billiton. Cloud won't receive any of the proceeds, but it does distribute its ownership and will no longer be controlled by BHP.

Once the dust of the secondary settles, I believe the price will readjust back to Friday's level and continue upward. Cloud is a low cost producer of coal for power plants and sells for 10X forward earnings and a modest cashflow multiple. Today's price decline, anticipating a lower offering price to move the large secondary, gives a new buyer a 5 % head start.

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