Joe Kunkle submits:Much like a skipjack, a triggering mechanism that causes mine cars to dump loads of coal in a mine, traders have been dumping coal stocks since peaking in July. However, the fundamentals of the industry are still intact and coal stocks are likely to provide huge investment returns over the next 3 to 5 years.
Yesterday, Peabody Energy (BTU) announced earnings that absolutely shocked the Street, beating the consensus on EPS and Revenues easily, and raising guidance for the year. When a major industry leader provides such a bright outlook, it is likely that the bottom in the industry has occurred. The most important statement to come out of the earnings announcement was that “the easing of demand growth is likely to be offset by diminished global coal supply”. Demand is the key driver for coal stocks and worries about slowdowns in china have led investors to oversell all of the coal stocks. However, emerging markets such as Russia, South Africa, and Indonesia are seeing robust demand for coal.
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