Buy This Coal Stock if...
Feb 27th 2013 2:00PM
Updated Feb 27th 2013 2:35PM
Few Americans want anything to do with coal, even outside of Christmas time. It's not the most environmentally friendly fuel, it isn't a thrilling gift to find in your stocking, and it is quickly being replaced by cheaper and cleaner burning natural gas. Overseas, though, it's a completely different story. Take a look at this chart:
As it would appear from that chart, coal's not going to become a fossil anytime soon. In fact, it might be time to add bit of it to your portfolio to profit from this future growth. To help you better determine which coal stock you'll want to buy, I've compiled the top reason why you'd want each company in your portfolio.
...you want easy access to the growth in Asia
Few companies have better access to the growth in demand for coal in Asia than Peabody Energy . Not only does Peabody have coal operations in Australia, which it acquired in 2011, but its U.S.-based operations in the Illinois and Southern Powder River basins are strategically positioned for exporting to these Asian growth markets. Its deal with Kinder Morgan Energy Partners to export coal out of its Houston, Texas and Myrtle Grove, La., terminals is just one more option for this company to access the international marketplace. In my opinion, an investment in Peabody is an investment in the growth of coal usage in Asia.
...you want to add some natural gas
Knowing that natural gas is taking a bite out of coal's share of the energy pie, CONSOL Energy has decided that if you can't beat them then you join them. The company is investing two dollars to grow its natural gas business for every dollar it spends to grow its coal production. Taking that one step further given its current plan, the company is not planning on spending any money to grow its coal production after 2014.
Even with the all the money CONSOL is investing in its gas business, the company is still a coal company at heart. It also has a very good export business with excellent rail transportation to send its Pittsburgh seam coal to its 100% owned Baltimore terminal for export. That terminal gives the company access to the world's markets, and it currently exports to four continents including Asia.
...you want a side of metallurgical coal
Like its peers, Alpha Natural Resources gives investors access to the global growth in coal. The difference here is that Alpha is a leading exporter of metallurgical coal, which is used in the production of steel rather than energy generation, like thermal coal. The company is No. 3 globally in terms of export volume, which drove 42% of its revenue. Alpha also has more export capacity than any other producer in the U.S. Even with all those metallurgical coal shipments, Alpha still sells good ole thermal coal, which accounted for 56% of its revenue last year.
My Foolish take
Of the three, Peabody interests me the most. I love its strategically positioned Australian assets and think that acquisition was a brilliant move. The more I dig into that company the more I like its prospects.
With exports becoming a much bigger part of the domestic coal landscape, I like the fact that Peabody Energy has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource -- simply click here now to claim your copy today.
The article Buy This Coal Stock if... originally appeared on Fool.com.Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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