Thursday, December 6, 2007

Coal Stocks Quietely in a Bull Market

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I hear almost no one talk about these names, but my basket of 4 coal stocks just continue to outperform. The charts are all mirrors of each other - if anything I do not have enough: Peabody Energy (BTU), Consol Energy (CNX), Massey Energy (MEE), and Mechel (MTL)

If you are new to the blog, a sampling of the series of articles I wrote on coal are below
  1. Originally went bullish mid September [Crude at $80? What to Buy]
  2. Another look a few days later
  3. Consol Energy turning into an exporter - late October [Coal Continues to Amaze]
  4. Bullish on Russian coal play Mechel early November [Two New Foreign Positions Added Today]
  5. Jumped into Massey mid November [Initiating Massey Energy on Continued 'Shortage' Theme]

These are not sexy like solars, and won't fly 30% in a week but they are steady contributors and from time to time can put 20% moves on in two weeks time. In the carnage in November these all held above their 50 day moving averages showing wonderful strength - what more can you ask for, downside protection and solid upside. Any American producer is also a weak dollar play (exporters win), and the US is the "Saudi Arabia of coal". So you get an energy play, a China play, a weak dollar play, all rolled into one. Even the Chinese version, Yanzhou Coal (YZH) is performing very well in the overall weak (of late) market for Chinese shares. As I stated when I first went bullish on this group, earnings in the near term would be horrid but these were 2008 plays and the charts were perking up - people are ignoring the current bad news and looking to the future. That thesis certainly is playing out.

Long Peabody Energy, Massey Energy, Mechel, Massey Energy in fund; no personal positions


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