Don’t Fight the Trend: Walter Energy Edition.

Back in the spring of 2011, life was good for Walter Energy investors. Stocks were two years into a bull market, and $WLT was trading at all-time highs north of $140 share. Since then, the economy has continued to improve. And energy – thanks to alternative upstarts like Tesla $TSLA and Plug Power $PLUG – has become sexy again.

So why has Walter Energy gotten killed and what prompted Bank of America to issue a $2 price target? Yes, that’s a two dollar price target!!

Ticker $WLT is the top-trending ticker on StockTwits this morning as investors attempting to make sense of the carnage awoke to news of a “high yield” bond offering…

PIK toggle: Walter Energy places $350M high yield bond offering to yield 9.5%/11% (cash) $ http://stks.co/r07Xl $WLT

— LCD News (@lcdnews) Mar. 20 at 07:01 AM

 

…which resulted in further share price erosion heaped upon an already bleak YTD performance and gag-reflex-inducing slide from 2011′s highs.

$WLT is losing ground in pre-market, down by -13.86% to $7.83 as I type. http://stks.co/q07IG

— Paul (@TradingPlays) Mar. 20 at 06:58 AM

 

In an era of essentially free interest rates, Ricster here states the obvious:

$WLT 11% interest rate is a disaster for any company.. Crushes any hope of making a profit

— Mr Ricster (@ricster3) Mar. 20 at 07:58 AM

 

Meanwhile, you don’t need to be an expert in corporate finance or be a balance sheet whiz to know an investment in $WLT has been a bad idea. Sometimes it’s a simple as following price:

Stocks making new 52-week lows in a bull market are usually there for a good reason. Do urself a favor and stay away from them. $WLT

— Ivaylo Ivanhoff (@ivanhoff) Mar. 20 at 07:39 AM

 

Let the market speak to you. Let prices tell the story. Sometimes, that’s all you need. The details will emerge, but by then you’ll be too late.

~ Sean McLaughlin (@chicagosean)


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