ASX-listed Whitehaven Coal Ltd (ASX: WHC) shares were trading lower today despite the broader S&P/ASX 200 (INDEXASX: XJO) (^AXJO) trading up 0.3%.
Whitehaven Coal is one of Australia’s largest coal miners, with many mines in New South Wales and more than 1,700 employees.
Are Coal Prices Reverting?
Whitehaven Coal shares have enjoyed a tremendous run-up in price since thermal coal prices hit a low of around $49 per tonne in early 2016.
More recently, however, Whitehaven shares have fallen from $5.66 in October to their current price of $4.32 as the price of coal reverted somewhat.
1 Reason I’m Not Buying Whitehaven Coal Shares
At today’s prices, shares in Whitehaven look very tempting.
It is one of the strongest coal miners on the ASX and its shares trade on a historical 8.5% dividend yield at a price-earnings ratio of 7x. Those metrics are far more compelling than your average ASX 200 company.
While analysts are forecasting profit and dividends to be maintained in the near term, I think there is really no way of knowing exactly coal prices will trade in the next 24 months.
What’s more, the main reason I’m not investing in Whitehaven comes back to one thing: my circle of competence.
With no ability to accurately forecast coal prices and little understanding of mining and the regulatory environment, an investment in Whitehaven shares would be well outside of my core areas of knowledge.
Charlie Munger, one of the world’s best investors, famously said envy is the only one of the seven deadly sins that we will get no pleasure from at all.
For investors, seeing other investors receiving an 8% dividend yield can make us envious. However, over the long run, I believe sticking to what you know will help you sleep easy at night and it tends to lead to better outcomes.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).