a case for long coal

http://www.energyandcapital.com/articles/coal-stocks/2234

A Case for Long Coal
By Nick Hodge
Tuesday, June 5th, 2012

Perennial June barbecues are springing up all over.

And in addition to horseshoes and steamed crabs, these events give us a chance to banter with friends and acquaintances that aren't a part of our daily lives.

More often than not, this consists of mundane small talk I could quite frankly do without.

I don't have kids and I'm not married, and discussing my preferred topics of finance, politics, and religion is apparently a faux pas.

(Which I don't understand... The world is in the midst of political and financial turmoil, and I'm supposed to nod and smile at how cute little Sally is with her floaties on? Her parents have no college or retirement savings, for crying out loud!)

But I nod and smile and affirm Sally's cuteness — it's surely more critical than the Syrian situation. Her parents have no clue where Syria is. And why should they, since there's no reality show about it?

So you can imagine how giddy I was when, as I cracked my second crab at a gathering this weekend, an elementary-school-friend-turned-UBS-advisor asked the following question: Is it time to buy coal stocks?

Yes

My friend and his parent company, UBS, are now bullish on coal stocks.

He's of the opinion natural gas prices will drift back up to $3.00/Mcf or higher, making the black stuff much more attractive than it is now.

Natural gas prices at a decade low coupled with environmentalist opposition has left domestic coal stocks at their lowest levels in years.

Peabody (NYSE: BTU) is at a three-year low; Arch Coal (NYSE: ACI) hasn't traded at current levels since December 2000.

Add in a May where the Dow lost over 6% of its value — the worst month in two years — and you have a sector that's been beaten down further than most others.

While we'll only start using more coal in the U.S. if natural gas prices rise, the rest of the world will be using more either way.

You see, the rest of the world hasn't undergone a shale gas boom.

And so natural gas, on average, is trading three times higher in most areas than it is here.

The U.S. will burn less than a billion tons this year.

But the rest of the world will burn six billion tons — and that's expected to rise to 10 billion tons by 2030, which could create a robust export market for U.S. coal.

These are all reasons why, yes, it's time to start buying coal stocks.