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Arch Coal (ACI) is a stock with a GREAT following, but is that a plus or a minus? At the present time institutional shareholders have tied up almost 98% of the stock. An individual investor should always look for a stock that has institutional following but I normally like to keep that at around 50%. When 98% of the stock is tied up by just a handful of institutions a few deciding to dump their stock could hurt you in the short run. Are you smarter than all the big boys?
Most of Arch's mines are in the US - that's a plus for stability of supply chain. Oil prices keep rising and coal is an energy alternative - that's another plus. Coal is a primary energy source for the metal refining industry - a third plus. India, China, US & Russia all will be long term consumers of coal.
Arch has been around for a while, has had stable earnings, margins and earning so the fundamentals look good. If coal prices go up faster than Arch's energy costs to get it out of the ground and to market everything will be fine. Arch is a stable, long term play but can you add it to your portfolio at the right price?
Arch has had a great run up. It's 5 year total return has been 564%. In 2006 you could have gotten in most of the year around 40 and the recent high has been up to over 77. If you are looking at Arch as a long term play I think you may have come to the dance too late, the big money seems to already have been made and all the big players got here way ahead of you.
Short term some of you traders might make a little money if you could put in some limit orders below 60 and make a few points on the up swing but don't expect this stock to double in the next year. Opportunity seems to be elsewhere.
To sum up, if you've got it congratulations you made a good decision but don't overstay your welcome, traders might make a few bucks if they time the price swing right but if you want to get in now and expect to double your money you have come to the dance too late.
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