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This Week's Hottest Sector

Newton's law of inertia doesn't always work in the stock market. For example, since Dec. 31, the S&P 500 index has lost about 8% of its value. Yet, oddly enough, homebuilders like Toll Brothers (NYSE: TOL  ) and D.R. Horton (NYSE: DHI  ) are in the green.

Insert dovetail here
Stocks in the same sector have a tendency to move in tandem, regardless of overall market conditions. After all, stocks in the same industry generally derive their revenues from similar sources and are similarly affected by news, legislation, or events.

Each week, we'll take a look at the hottest sector over the past five days according to's "Sector Tracker," and then cross-reference the individual equities against investor data on Motley Fool CAPS, the Fool's free investing community. Using CAPS, we can get a better feel for what both individual and institutional investors are saying about these stocks.

A surprising sector
This week's top sector is coal, which is up 16.6% in the last five trading days. This group includes:


5-Day Price

CAPS Rating
(out of 5)

Peabody Energy (NYSE:BTU)



International Coal Group (NYSE:ICO)






Alpha Natural Resources (NYSE:ANR)



Arch Coal (NYSE:ACI)



Sources:'s "Sector Tracker" and Motley Fool CAPS as of Jan. 30.

Anthra-citing opportunities
With global demand for energy sources riding high, especially in emerging markets like China and India, it should come as no surprise that CAPS investors are generally bullish on the coal industry.

In fact, a recent article in The Wall Street Journal said, "Sharp increases in oil prices in recent years have already encouraged China to substitute coal for oil. Morgan Stanley said China's oil-dependency ratio fell to 20% in 2006 from 23% in 2002, while its reliance on coal has risen." In other words, if oil prices stay high and China's economy continues to surge, coal companies could benefit immensely.

Moreover, as of 2006, the United States has the largest recoverable coal reserves in the world, with a 27% share of global supply. One reason domestic coal producers have surged in the past week is because of international supply problems stemming from flooding and power outages. This drove up coal prices and made U.S. coal that much more attractive to energy-starved economies.

Despite the generally bullish sentiment, there are fervent coal bears on CAPS, including player hightechallthewa, who in December expressed his concern about geopolitical influences in this sector:

Here, with coal that is, we have to be super careful. Politics, whether domestic or international, moves the sector in either direction. Therefore, while I remain bullish about the coal sector, I definetly would like to protect my coal-gains.

In this Fool's opinion, coal could certainly be a beneficiary of increasing global energy demand, but some companies are better poised than others to capitalize on this trend. Be sure to take the time to do your homework when searching for tomorrow's coal kings.

What do you think? Was this week's positive news the catalyst that will send coal stocks soaring? Voice your opinion on Motley Fool CAPS, where 83,000 investors are waiting to hear what you have to say. Just click here to get started. CAPS is 100% free.

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12/31/1969 7:00 PM
ACIIQ $0.00 Down +0.00 +0.00%
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ANRZQ $0.00 Down +0.00 +0.00%
Alpha Natural Reso… CAPS Rating: **
BTUUQ $10.59 Up +4.32 +68.90%
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