Biggest Surprise of the Day: Coal?

After taking a severe beating last week -- in fact, the worst five-day session so far this year, the Dow Jones Industrials stormed back today, finishing up 1.09%. The other two major indices even outperformed the Dow, with the S&P 500 finishing up 1.60% and the Nasdaq pulverizing the market with a 2.46% performance. Also turning in a strong rally today was the United States mid-continent oil benchmark, WTI oil futures, up 1.49%.

The biggest surprise
The coal industry experienced a brief but much-needed pop in the markets today. With natural gas prices offering a cheap energy alternative, this industry has been battered and beaten worse than any other over the past year. However the sub-industry outperformed the broad markets. Let's look into a few of the companies:


Today's Price Change

52-Week Price Change

Estimated 5-Year Growth

Arch Coal (NYSE: ACI  ) 7.22% (75.54%) 6.50%

Alpha Natural Resources


7.16% (78.24%) 5%

Cliffs Natural Resources

  (NYSE: CLF  )

5.67% (43.39%) 2.46%
James River Coal (Nasdaq: JRCC  ) 9.46% (84.95%) 11.09%

Source: Yahoo! Finance.

Why today?
Usually, large price swings follow mergers and acquisitions, earnings reports, or other significant changes in a company's outlook. On Monday, the bump for coal producers came on news of a raised assessment on Central Appalachian thermal coal prices. China's determination to focus on growth is also promising, because of the greater possibility of more worldwide energy consumption and increased building.   

Foolish takeaway
I wouldn't look at today's increase as start of a bull market for coal. True, coal still accounts for 20% of the United States' power, and the figure is considerably higher in developing nations, especially China, but with natural gas prices expected to stay unchanged in the near term, I don't see coal making much of a run. For a great investment, I would consider the company in this free report -- it's an energy firm that can withstand shocks in oil prices, and most other oil and gas companies are heavily dependent on it. See what this company is and why it's considered the only energy stock you'll ever need.

Joel South owns shares of no company listed above. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 22, 2012, at 9:28 AM, Usurped wrote:

    20% of US power? Where do you get your off by half figures? 20%? Go read some more (EIA for starters) and report back with your much needed correction.

  • Report this Comment On May 22, 2012, at 9:30 AM, Usurped wrote:

    Try 42% of US Power generation is via coal.

  • Report this Comment On May 22, 2012, at 11:22 AM, AugieBusso wrote:

    If Obama loses the election, the price of the coal producers will surge dramatically. I'm loading up now as I believe Barry is going to get dumped.

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