- How to bet against politicians
- My father-in-law’s favorite investment
- Profits from coal
would love to tell you that I’m bullish on stocks, the fact is that we remain
in a secular bear market. For this reason, investors should heed caution, avoid
speculation, and focus their investments on great companies in the commodity
sector at cheap valuations.
Why? It’s very simple: commodities tend to do well
during a bear market for stocks.
So what are the big
certainties as far as I can tell? Sovereign debt problems aren’t going away, and the world’s politicians
and central bankers are dedicated to the idea that they’d rather inflate their
currency than default on that debt. They’re staking their currencies on the reputation that their currencies
are still sound money. It’s a losing bet
for central bankers and a boon for folks who trade in paper currency for real
money: gold and silver.
talked about gold and silver plenty over the past few weeks, and I’ve been
neglecting a commodity that my father-in-law Ron Blackwell calls “the king of
He’s talking about coal, and
he’s absolutely right. It’s the king of
all resources, because it’s responsible for close to 50% of all electricity
generation in the United
States. You can click here
to view a pie chart showing recent electricity generation data from the Department of
But it’s not just the United States
that uses lots of coal. The Energy Information
Administration estimates that:
“Coal consists of roughly three-quarters of [China’s]
power generation feedstock and the EIA forecasts they will maintain this market
share through 2030.”
So if you’re not invested in
coal, you’re missing out on some of the biggest and most certain profits in
world history. While I’m bullish on precious metals, and I believe in the
certainty that central bankers will continue to destroy paper currencies to
avoid default, there’s an even bigger likelihood that the world will continue
to use electricity – and that the lion’s share of electricity generation will
come from burning coal.
If you like that kind of
certainty, I’ve got good news. I know I’m guilty of teasing investments in this
letter, and not always providing solid, actionable advice – but this trend is
just too big and too obvious for subtlety.
I’m going to talk about one of my favorite ways to play the coal trend – no
hype, no teases.
As I said at the beginning
of this issue, I look for certainty, not speculation. That goes for macro trends as well as company
specific details. There are plenty of
micro-cap coal miners you can speculate on, but I’m more interested in
companies that aren’t going anywhere, that are in politically safe regions that
I know and understand.
That’s why I’m excited about
CONSOL Energy Inc. (NYSE: CNX), a $9
billion coal company.
This company mines steam
coal in the Appalachian region of Pennsylvania
– and they have lots of proven coal reserves: nearly four billion tons to be
exact. That’s enough coal to satisfy all
coal demand in the United
States for almost four years.
CONSOL mines more bituminous
coal (the kind most often used in power plants) than any other U.S.
So they’re one of the
biggest coal companies in the United
States, and they have extensive reserves.
That’s a certainty I’d like to own in my investment portfolio. The company also
happens to be one of the most inexpensive coal stocks in the market today, with
a trailing PE under 17, and a forward PE of about 9.
To put this number in
perspective, most of this company’s peers in the coal mining sector trade at
valuations closer to 20-30 times earnings. So today, CONSOL is a true bargain
If you buy this company
today, you’re getting your portfolio in front of a long-term trend that shows
no signs of stopping. And it’s a contrarian play! While President Obama
lectures us on the hazards of oil and touts alternative energy, the crowd will
pursue pie-in-the-sky investments in unproven, unlikely technologies and fuels.
In the meantime, your money will be safely nestled in the warm certainty of
coal’s dominance in the energy market.
Coal’s not going anywhere,
and neither is CONSOL Energy – so putting your money with this trend and this
company makes good sense.
Today, CONSOL is selling for
just a hair under $40. I think this company is a fair deal under $44, and a
screaming steal under $36. I’d recommend buying this company in tranches, and
holding it until we stop using coal. It pays a modest one percent dividend that
I’d expect to rise along with coal prices.
If this type of coal
investment seems too boring for you, I recommend checking out a smaller, more growth
oriented coal company that sells coal in the Chinese market. So far, our readers are up 30% on this stock,
and we think there’s plenty more upside in this stock, as China continues to use more and
more coal to feed its growth.
If you’re interested, I
invite you to click
here now to read more details about this company from Chief Investment
Strategist Ian Wyatt.