As strongly as I believe that the development of a renewable-energy infrastructure is crucial to charting a more sustainable path into the future, as an investor I refuse to overlook the enticing outlook for the coal-mining sector.
I've been reporting developments from this sliver of the market for several years now, and I remain amazed by the juxtaposition of an unmistakably bullish long-term investment opportunity and a noticeably lackluster level of interest among investors. Fools have been privy to the series of insider forecasts from well-informed equipment manufacturer Joy Global
Now, after a fairly sharp selloff in commodity stocks over the past couple of months, Goldman Sachs analyst Andre Benjamin considers the entire coal sector "attractive." He selected Patriot Coal
Expecting the sector as a whole to see average gains of up to 35% after a deep countercyclical dip, Benjamin adds: "We expect recent increases in thermal exports and lower production levels to persist, leading to near-normal thermal coal inventories by year's end and forcing domestic utilities to sign baseload contracts for 2012 at prices above mid- cycle." Fools will recall that stockpiles of thermal coal at U.S. utilities surpassed 200 million tons during 2009, and by this past February those utility stockpiles had already improved to less than $162 million tons. Exports of U.S. coal, which surged 47% over prior-year levels during the first quarter, are accelerating the pace at which that supply overhang is cleared from the market and helping to pave the way to sustained pricing strength for domestic producers.
If I'm incorrect in my assertion that investors continue to routinely overlook coal stocks despite what Arch Coal
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Peabody Energy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.