"There never really is a "its different this time" scenario in resources, the boom and busts are part of the sectors DNA."
Yes, actually there is. There is a this time is different in every scenario.
In order to make money in investing, you have to take a position which is at odds to market consensus. If you invest according to market consensus you will get market returns. Yes you may run the risk of being wrong, but you also will benefit greatly from being right. Being right against market consensus very frequently comes from "this time being different."
Lets examine the current opportunity. You state the price of coal will mean revert, and returns will diminish. You also seem to imply that capital will be lost forever if you invest today.
The facts: 1. WHC is trading a P/E of about 1.5 against todays spot price 2. WHC have no debt 3. We have a war in Ukraine and Russia currently constraining supply of coal and gas 4. Europe currently has no viable substitute for thermal coal as there is no surplus LNG globally
Some comments regarding the above.
1. We aren't buying a tech stock at a p/e of 1,000, which may or may not make you a return in the future based on ambitious predictions about the future. You will make your money back in 1.5 years given the current status quo. Would you say that's a more likely or less likely event than the tech stock example? 2. It' very very hard to go broke when you have no debt. Nearly impossible 3. No ambitious assumptions or prediction about the future is required to see what's causing the supply deficit. Yes the war could end but that's not the status quo. 4. No predictions about the future required, the demand is here and its showing up on in the spot market. The economic responsibility is on the market to come up with alternatives which currently don't exist.
The only question left is how long will this demand stay elevated and supply constrained?
Well I only need 18 months to get my entire capital investment back. The case for this time being different is very strong as pointed out above. The market is pricing in a material drop in price in the short run. I don't need it to be different forever, just different long enough to make an outsized return.
You show me another investment where the odds are they stacked in my favour while getting paid absurd cash distributions and i'll leave this forum and never return.
WHC Price at posting:
$4.65 Sentiment: Buy Disclosure: Held
(20min delay)