Many previous articles on this site have supported the idea of investing in coal securities due to the industry being out of favor with Wall Street.
While coal companies are suffering, the entire business sector is not going bankrupt. That was the thesis of an excellent article in The Wall Street Journal recently by John W. Miller and Rebecca Smith, “The Future of Coal: Despite Gas Boom: Despite Gas Boom, Coal Isn’t Dead.” After reading the articles, investors should consider the leading coal company, Peabody Energy (NYSE: KOL), and the exchange traded fund for coal, Market Vectors Coal (NYSE:KOL).
Others such as Arch Coal (NYSE: ACI) and James River (NASDAQ: JRCC) are riskier, but the price is much lower, too.
The appeal of coal is its ease of use. It is widely used around the world. Coal still provides most of the electrical power in the United States. Natural gas will not be replacing it anytime soon due to logistical issues.
Natural gas requires three sets of pipelines to take the fuel from the ground to the home or the business. That is very expensive: not even the United States have enough pipelines for an efficient market. That is why prices will go higher due to build-ups in the pipeline.
Coal, by contrast, is easy to produce and deliver.
When investing in industries that are suffering, it is prudent to buy shares of the exchange traded fund and the best company. That is Market Vector Coal and Peabody Energy. For those with a higher risk tolerance, there are firms that have been battered down like James River and Arch Coal.
How strongly coal recovers comes back depends on many factors, but it will rebound and investors should profit from the recovery.