Buy This Coal Stock if...

Few Americans want anything to do with coal, even outside of Christmas time. It's not the most environmentally friendly fuel, it isn't a thrilling gift to find in your stocking, and it is quickly being replaced by cheaper and cleaner burning natural gas. Overseas, though, it's a completely different story. Take a look at this chart:

SOURCE: Peabody Energy Investor Presentation

As it would appear from that chart, coal's not going to become a fossil anytime soon. In fact, it might be time to add bit of it to your portfolio to profit from this future growth. To help you better determine which coal stock you'll want to buy, I've compiled the top reason why you'd want each company in your portfolio.

...you want easy access to the growth in Asia
Few companies have better access to the growth in demand for coal in Asia than Peabody Energy (NYSE: BTU  ) . Not only does Peabody have coal operations in Australia, which it acquired in 2011, but its U.S.-based operations in the Illinois and Southern Powder River basins are strategically positioned for exporting to these Asian growth markets. Its deal with Kinder Morgan Energy Partners (NYSE: KMP  ) to export coal out of its Houston, Texas and Myrtle Grove, La., terminals is just one more option for this company to access the international marketplace. In my opinion, an investment in Peabody is an investment in the growth of coal usage in Asia. 

...you want to add some natural gas
Knowing that natural gas is taking a bite out of coal's share of the energy pie, CONSOL Energy (NYSE: CNX  ) has decided that if you can't beat them then you join them. The company is investing two dollars to grow its natural gas business for every dollar it spends to grow its coal production. Taking that one step further given its current plan, the company is not planning on spending any money to grow its coal production after 2014. 

Even with the all the money CONSOL is investing in its gas business, the company is still a coal company at heart. It also has a very good export business with excellent rail transportation to send its Pittsburgh seam coal to its 100% owned Baltimore terminal for export. That terminal gives the company access to the world's markets, and it currently exports to four continents including Asia.

...you want a side of metallurgical coal
Like its peers, Alpha Natural Resources (NYSE: ANR  ) gives investors access to the global growth in coal. The difference here is that Alpha is a leading exporter of metallurgical coal, which is used in the production of steel rather than energy generation, like thermal coal. The company is No. 3 globally in terms of export volume, which drove 42% of its revenue. Alpha also has more export capacity than any other producer in the U.S. Even with all those metallurgical coal shipments, Alpha still sells good ole thermal coal, which accounted for 56% of its revenue last year. 

My Foolish take
Of the three, Peabody interests me the most. I love its strategically positioned Australian assets and think that acquisition was a brilliant move. The more I dig into that company the more I like its prospects.

With exports becoming a much bigger part of the domestic coal landscape, I like the fact that Peabody Energy has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource -- simply click here now to claim your copy today.


Read/Post Comments (3) | Recommend This Article (3)

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 February 27, 2013, at 3:07 PM, Paulson545 wrote:

    There has been recent insider buying in Arch Coal. aci

  • Report this Comment On February 27, 2013, at 5:42 PM, Mark2013 wrote:

    I agree about BTU but when looking for 300% or more upside in a stock near term aka 36 months, I must go with ANR first because, I look for at least 300% like it, ZNGA, AKS, AMD and other stocks will bring but I do see double for BTU so obviously own shares there too to be safe. X is another 300% mover to come too.

    Been trading 33 years now, there is risk in every stock and this is only my opinions rather than to get anyone to buy, sell or hold anything.

  • Report this Comment On February 27, 2013, at 7:33 PM, TMFmd19 wrote:

    @Paulson 545 - Thanks for the tip on ACI, I need to look closer at them.

    @Mark2013 - 300% upside in ANR? I'm not sure I see it as I think met coal prices will be stuck in neutral but if you see something I don't let me know cause I'd not want to miss that upside!

    Matt

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