 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Tuesday August 17, 2010
Peabody Energy (BTU): Coal sector heats up
by Mark Skousen, editor The Hedge Fund Trader Alert  The energy and commodities sectors now appears to be heating up. And one booming market is coal. Our latest featured idea is Peabody Energy (BTU), the dominant U.S. coal company. Coal demand is rising both domestically and globally, especially among the BRIC emerging markets. Utilities' domestic consumption during the first half of 2010 increased by 25 million tons in the first half of 2009. Meanwhile, total domestic coal production decreased by 15.5 million tons during the same period. Peabody Energy is superb positioning in the low-sulfur, very low extraction-cost Powder River Basin in the United States gives Peabody a scale, product quality and cost advantage that is simply impossible for its rivals to replicate. Peabody also is geographically diversified, with a few mines left in the Appalachian region, where it has been divesting, as well as some in the Illinois basin. But, more importantly, the company enjoys a very profitable and fast-growing presence in Australia. Peabody’s latest earnings report beat Wall Street estimates by a large margin, and boosted its guidance for the year. Revenues rose 25% to $6.4 billion, and earnings skyrocketed 160% to $557 million. Despite the recent rally, Peabody still is selling at 10 times expected earnings. Let’s buy Peabody Energy at market and set a protective stop of $39 a share. For those willing to take greater risks, consider buying the January 2011 $60 call options. The last trade was at $1.55. Learn more about this financial newsletter at Mark Skousen's The Hedge Fund Trader Alert. 
|
News Flash
|
|