Coal isn’t going away any time soon.
What’s better, knowing this simple truth could be our ticket to profit.
Geez, have you seen the price of coal stocks lately? The way the chart looks for many of the U.S. majors, you’d think the industry is about to shut its doors.
But from what I’m seeing, that’s far from the case. And today I want to prove it to you…
Two big names in U.S. coal have been simply crushed this year:
Alpha Resources – down 66%
Arch Coal – Down 56%
Looking further out, the past five years represent an epic downfall for king coal. Get this. In 2008 Alpha was a $100 stock and Arch was a $70 stock – now both trade around 6 bucks a share. There must be blood in the streets!
Most other coal plays in the U.S. have had a similar fate, too. And fundamentally it makes some sense…
After all, coal is considered “dirty” energy. So legislation has not been favorable here in the U.S., especially under the Obama administration.
Plus, at the same time the coal industry is facing a formidable headwind from Washington, the shale gas boom has made coal-burning power plants and coal-using steel manufacturers virtually a thing of the past. Natural gas as you know, is now cheaper, more efficient and cleaner to burn. So when coal-fired power plants have the choice to switch, they do. Same goes with big steel manufacturers like U.S. Steel.
It’s a coal bloodbath! It’s also our perfect opportunity to buy low in this resilient power source…
You see, although U.S. coal use is dropping off the charts, demand from Asian and European markets is booming.
Just remember, coal is plentiful… easy to transport… and cheap. The way I see it, this versatile fuel source isn’t going anywhere – and rock-bottom prices for some of the industry’s best companies represent a true opportunity.
The best way to look at this situation is through U.S. coal exports. After all, the export numbers should be a good indication of where the industry is heading. Here’s a look at the recent export action…
Of note, 2012 is on pace to set the record for coal exports with a forecast of 125 million short tons, smashing the previous record, 113 million short tons, in 1981.
This is another reason why America’s future is very promising. Along with more petroleum product exports, and potential LNG exports and manufacturing exports the U.S. is seeing a huge rebound in coal exports!
When you take a close look at the ticker tape you can see who’s buying, too: China, India, Brazil and Europe are the major markets. Coal use in those markets has been ramping up of late. After all, those countries don’t have a bounty of cheap natural gas – so easily-transferable coal is the second best option. It’ll remain that way for years to come.
Coal stocks are due for a rebound. With shares beaten down to 3-year lows, now’s the time to look at your favorites. More on this to come…
Keep your boots muddy,
Original article posted on Daily Resource Hunter
Matt Insley is the managing editor of The Daily Resource Hunter and now the co-editor of Real Wealth Trader and Outstanding Investments. Matt is the Agora Financial in-house specialist on commodities and natural resources. He holds a degree from the University of Maryland with a double major in Business and Environmental Economics. Although always familiar with the financial markets, his main area of expertise stems from his background in the Agricultural and Natural Resources (AGNR) department. Over the past years he's stayed well ahead of the curve with forward thinking ideas in both resource stocks and hard commodities. Insley's commentary has been featured by MarketWatch.
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