Broken Record - Coal Flying

As I keep saying the coal sector is a lot like fertilizer when analysts had no clue about the earnings potential - I wrote in October just how wrong these guys who do this for a full time living and focus on only 1 sector were in the fertilizer sector [Oct 23: Analysts Still Doubting the Fertilizer Stocks - I'm Adding Potash Ahead of Earnings] and I'm writing the same things nowadays in coal [May 5: Alpha Natural Resources Booming Earnings - Just the Start] and [May 1: Walter Industries - the Most Amazing Company]. I continue to be amazed that guys who follow a sector 24/7 for their career miss some of these things, that random future mutual fund managers who follow countless sectors (instead of only 6-8 stocks) can see clearly. Maybe it's the lack of a MBA that allows one to see reality? Or not having to worry about my $5800 NYC monthly apartment rent? ;) As is typical "they" are now upgrading stocks after a 40-50% move up in the last month. Excellent timing again.

That said, I'd really appreciate a pullback here, please? [May 21: Coal - Just Amazing] These stocks continue to just be on fire with another sector wide move, led by our top dog Alpha Natural Resources (ANR) up nearly 10%. Days like this, I hate the fact I sold any along the way :)

• Coal stocks traded mostly higher Wednesday as a UBS analyst lifted his rating on one of the world's largest producers to "Buy," suggesting the company has some unrecognized potential to take advantage of soaring coal prices.
• Analyst Shneur Z. Gershuni raised shares of Peabody Energy Corp. from "Neutral," saying the company should benefit from better-than-expected coal prices next year. (late... to... game?)
• The company's exposure to metallurgical coal and its production in the Illinois Basin is "under appreciated by the market," the Gershuni said. Gershuni estimates the two markets make up 15 percent of Peabody's total production, but could account for as much as 45 percent of the producer's earnings if prices soar as expected next year.
• Gershuni raised 2009 earnings per share estimates on the company to $6.59 from $4.49. The current average estimate of analysts polled by Thomson Financial is $4.64. Gershuni also raised his price target on the stock to $86 from $67.
• Gordon Howald, an analyst with Calyon Securities Inc., said rising coal prices, especially in China, will likely spur growth for a number of U.S. producers. He recommends investors buy shares of Arch Coal Inc., Foundation Coal Holdings Inc. and Peabody.
  
• "We continue to believe the coal market has legs as we head into 2009," he wrote in a client note.

Now I did flip out Peabody Energy (BTU) for Alpha Natural Resources back in April (always been a big fan of Peabody though due to Australian exposure) [Apr 8: Changing Coal Allocation - Peabody Energy Out - Alpha Natural Resources In], just so I wouldn't have a portfolio full of coal companies (I have 4 pure plays, and 2 sorta coal plays), but frankly throw a dart and come back in a year and make money. That said, swapping BTU for ANR was a prescient call - click here to see a comparison the past 3 months. But I'm trying to make the most money as possible, hence my specific choices - on this one not only did we get the right boat, but we got the perfect seat as well. ;) If you don't know the individual companies you can always go to the ETF KOL [Jan 14: New Coal ETF (KOL) Introduced from Van Eck Global]

I'm not chasing these names after such epic moves, but with what I have left I am just sitting and watching with glee and when any related name pulls back, as did Mechel (MTL) last Friday I throw in a new layer of purchase. (up 14% since we bought Friday)

One day these will correct; when it happens we will ignore the white noise spewing from TV how the story is over and be buying hand over fist - coal is really a 2009 story, not a 2008 story; which makes the current move all the more marvelous.

Long Mechel, Alpha Natural Resources, Arch Coal in fund; long Mechel, Alpha Natural Resources in personal account