Can Coal Power Your 2010 Portfolio?

• By the tickerspy.com Staff
• On 12:17 pm EDT, Monday September 14, 2009

Barron's is still bullish on coal.

According to the newspaper, Consol Energy (NYSE: CNX - News) still has room to run. Analysts' 2010 price targets put a 10% premium on the stock, and, citing valuation metrics, Barron's noted the company's favorable EV/EBITDA multiple in comparison to competitors Peabody (NYSE: BTU - News) and Arch Coal (NYSE: ACI - News). The reiterated recommendation is helping Consol shares by 2.3% today.

As a whole, the Coal Stocks Index is trading higher by 1.6% to start the week, pushing it ahead of the S&P 500 by 1% over the last month. Over the last week, the Index is a top-20 performer among tickerspy's more than 250 sector-based stock Indexes.

Basu Mullick, a fund manager at former Lehman Brothers subsidiary Neuberger Berman, told Barrons he thinks coal stocks are still undervalued. While Westpac senior economist Justin Smirk warned BusinessDay that a shift towards gas and nuclear energy could weigh on future margins in the coal sector, a rebound of the global economy remains a bullish indicator for the sector.

National Coal (NASDAQ: NCOC - News), Patriot Coal (NYSE: PCX - News), and Headwaters (NYSE: HW - News) are all up by more than 14% over the last month, while Yanzhou (NYSE: YZC - News), Natural Resource Partners (NYSE: NRP - News), and Penn Virginia Resource Partners (NYSE: PVR - News) have all turned negative for the period.

Nearly all coal miners have enjoyed a rally over the last five trading days. Massey Energy (NYSE: MEE - News) and Walter Energy (NYSE: WLT - News) are both up by over 8% for the period, as are International Coal Group (NYSE: ICO - News) and James River Coal (NASDAQ: JRCC - News).

As of this writing, the Coal Stocks Index is one of the 15 cheapest tickerspy Indexes by price to earnings, with an average P/E ratio of just 11.6.

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