An energy commodity more vital than crude oil
Last week I had to cut Friday’s issue of Small Cap Investor Daily a little short because I had an opportunity I wanted to jump on. Actually, there were two opportunities I wanted to take advantage of, but I only acted on one. The other I’m still keeping my eye on, but suffice to say I’ve found a little company with a potentially game changing technology. But for the time being more research is needed - I’ll let you know what I find out.
Let’s get back to the opportunity I acted on.
It should come as no surprise that I follow a number of small cap energy stocks and am constantly looking to pick up shares when the timing is right.
Last Friday I pulled the trigger and added a small coal mining company to the Small Cap Investor PRO portfolio. You can get my full research report here.
***Coal may be the last thing on earth that many investors would consider putting a dime into.
But the world is on course to transition back to coal. You may wish it wasn’t the case, but it’s inevitable. Coal isn’t as clean of a fuel source as other options - but there is room for clean coal technologies to improve, and I believe they will. Investors should have a position in coal companies to be able to profit from the transition - or risk being left behind.
That’s why I just picked up shares in this fast growing coal company. I believe the bull market for coal is just beginning to heat up. And the U.S. based coal company I’m adding today has mines in China - the world’s largest consumer of coal.
China gets around 78% of its electricity from coal. Over the last fifteen years, coal helped the country double energy output. And since 2002 China’s coal consumption doubled as well. Coal demand in China is so strong it must import coal from Australia and even the United States. But that just means that China’s domestic coal producers have no problem selling all the coal they can dig up.
That’s why I want to own this coal mining company - it has operations in China.
***The transition back to coal is due to the depletion of global oil reserves. Regardless of whether you believe peak oil has occurred, or is about to occur, the fact remains that in the very near future oil production will decrease at an increasing rate. And events like the uncapped oil well spilling into the Gulf of Mexico right now aren’t helping to sell a future of oil dependence.
For the last 50 years, oil has been the primary source of energy supply. From 1899 to 1948, a period when oil exploration and transportation was far less economical than it was for coal, coal consumption far exceeded oil consumption.
Then in 1965 global oil use passed global coal use. The transition came at around 1500 million tons oil equivalent (mtoe). Since 1965 oil hasn’t looked back. But it is now, and this chart shows why.
This chart projects coal and oil use globally out through 2014, coal once again becomes the primary energy source for the world in mid 2012.
I was provided this chart from my friend and colleague Gregor Macdonald. Gregor is a leading oil analyst and energy sector investor. He invests his own money in energy stocks, and has been quite successful. I value his opinion, and have profitably acted on his advice on numerous occasions.
He’s perplexed by the fact that more investors aren’t aware that coal is staging a comeback. We both agree that investors need coal exposure, but that very few have it.
The company I uncovered is positioning itself to cash in on the coal boom. And I want you to be aware of the company’s prospects so you can reach your own conclusions about whether a coal investment is right for you.
There are many ways to play the coal boom. You can buy a coal ETF, large cap miners, and domestic producers. But I’ve looked at all these options. And right now, I believe I’ve uncovered the single best coal investment opportunity. This investment is for investors who have the stomach to invest in the occasionally volatile, but always hugely opportunistic small cap asset class.
You can get my full research report on this company, as well as all the other small-cap stocks I follow, when you sign up for a risk free trial subscription to Small Cap Investor PRO. Click here to get started.
I’ll talk more about the opportunity in coal in the coming weeks. And I’d like to know what you think. Send me your thoughts on investing in the industry, and any coal stocks that you like. My address is: editorial@smallcapinvestor.com.
