Wednesday, October 3, 2007

Consol Energy (CNX) Gets an Upgrade and $55 Target

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Consol Energy (CNX), the fund's 3rd largest long holding got an upgrade today from UBS and a $55 price target.

""We believe Consol Energy will benefit from its strong asset base of primarily Northern Appalachian coal, as well as its 81.5% ownership of CNX Gas a producer of coal-bed methane, UBS said."

Along with Peabody Energy (BTU) these 2 coal plays are the 3rd and 5th largest long positions in the fund.

Ironically Peabody Energy is reacting even better today, up 3%. Peabody has a nice Australian exposure, which by proxy means CHINA. I see some news out today that some Japanese utilities are paying Peabody Energy (BTU) 25% more for coal in 2008, than 2007 levels. That's pretty sweet (for me) - not so much for Japanese consumers.

For my thesis on the coal stocks, which I turned bullish on in mid September click here. Since then, with the continued destruction of the dollar thanks to the Fed needing to bail out rich people from their speculation, the outlook for US exporters improved - and guess what, Consol and Peabody (along with Arch Coal (ACI)) probably have some coal they could export to you... and as the dollar falls it becomes even cheaper for other countries to turn to US coal. I like this story more by the week. Thanks Ben!

Another play in this space is Massey Energy (MEE) which Barron's has an online story out from last night.

I am buying MORE Peabody Energy (BTU) on this news. I think the commodities bull market is a crowded trade but I don't think coal has been considered part of that play. It's not very sexy. This Japan news is pretty startling... 25% price increase in 1 year.

Long Consol Energy, Peabody Energy in fund; no personal position

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