Thursday, December 27, 2012

Coal Stocks May be Set to Improve

This was reported by Barrons late last week...

Blame the regulatory woes of a dirty industry, the oversupply of coal, the rise of natural gas, or global growth worries. Whatever the choice, there’s plenty of negativity to go around. And that’s what makes it worth a second look. Ned Davis Research’s Neil Leeson, for his part, calls coal his “sleeper” pick for a strong 2013 in a subscribers-only podcast this morning.

The thesis is premised less on sour investor opinion than on hopes for emerging markets. If emerging-markets demand picks up, so will demand for coal, Leeson notes. China in particular has strategists convinced of stronger growth next year. If it all comes together, coal is a banged-up sector that will benefit.

Additionally, reports are showing very strong imports of coal into China, and are expected to increase by about 7% to 10% next year. Coal is increasingly becoming an export story. High natural gas prices world-wide, the reduction of production capacity, and the eventual export of U.S. gas will likely support coal prices over the intermediate term.

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