Notice how no one really ever talks about coal? For as much it does, it sure gets ignored, compared to oil and natural gas.
Perhaps plentiful global supply and large reserves make coal the ‘Old Faithful’ of energy. Don’t forget though – coal is still a commodity and not impervious to market fluctuations.
From the floods in Australia, to the increased demand from developing countries who want electricity on the cheap, coal has quietly and steadily gone north.
If you’re looking for an awesome coal play for your portfolio, look for one that is managing the lows and exploiting the highs. Don’t get caught holding shares of a weaky! Take a look at National Coal Corporation (NCOC):
At the onset of the Great Recession, its stock price tanked like everyone else’s, but hasn’t recovered at all even though US coal prices are reemerging. Where National Coal once consistently outperformed the sector leading up to the crash, its share price is diverging from the price of coal. Abandon ship!
National Coal is fortunately not the only game in coal town. Some coal companies have offered better returns than the commodity itself. That’s alpha folks! Walter Energy (WLT) for example, since the global economic downturn has surged:
Another company that may boost the strength of your portfolio is Patriot Coal Corp. (PCX):
Its stock movement is also closely correlated to the price of coal, hitting the lows when the market is down, but picking up steam when the price of coal inevitably rebounds.
Oil and nat gas may be A-listers at commodities parties, but don’t forget about coal! It’s important to global infrastructure, especially in emerging markets. Macro-economic insight gives you the ability to choose your investments on more than stock price, which could add strength and stability to your portfolio.