The markets have been declining rapidly for several weeks now. The price of copper has plunged along with the markets and investors are selling stocks in both the mining and the coal sector due to concerns of a recession. Also adding to the downside are concerns that the economy is slowing in China. Since China is one of the largest markets for coal and copper, it's easy to understand the fears of many investors. A recent article in the Chicago Tribune states "China's manufacturing sector contracted for a third consecutive month in September, suggesting that the world's second-largest economy is not immune to global headwinds, while factory inflation quickened." It goes on to say "The trade sector no doubt faces increasing risks, but recent export growth momentum is holding up decently. China is not facing a collapse in global demand yet, as witnessed in 2009." Read the full article here.
While it seems likely that the global economy will see a slowdown in the next couple of quarters, some of the coal and copper stocks appear to be oversold. Even so, they are likely to see more downside along with the markets in general, but they could be close to a bottom. Some stocks have dropped more than 50% in just weeks and it now makes sense to start watching these stocks for a bottom and prepare a buy list of future investments. The coal stocks were extremely weak in the last financial crisis and went lower than most believed they would, so be careful not to buy too much before seeing a real bottom. Here are some of the coal and copper stocks to consider for a significant rebound and double in the next couple of years, once the wave of selling is over:
Peabody Energy Corporation (BTU) primarily engages in the exploration, mining, and the sale of coal in the USA and Australia.
This stock was trading around $60 per share in July and the share price has almost been cut in half in the market correction. This stock traded for about $20 per share in the lows of the last financial crisis, so it could drop further and the more it drops, the more I would consider buying.
Here are some key points for BTU:
- Current share price: $31.61
- The 52 week range is $31.57 to $73.95
- Earnings estimates for 2011: $3.95 per share
- Earnings estimates for 2012: $5.69 per share
- Annual dividend: 34 cents per share which yields 1%
Alpha Natural Resources (ANR) is a major coal producer with operations in the Appalachian region. This stock traded around $68 per share in the past year and it was way too high at that price, but now it looks cheap. However, cheap stocks can get cheaper, so it makes sense to buy a little at a time in case it drops further.
Here are some key points for ANR:
- Current share price: $16.04
- The 52 week range is $16.00 to $68.05
- Earnings estimates for 2011: $1.96 per share
- Earnings estimates for 2012: $2.54 per share
- Annual dividend: none
Southern Cooper Corporation (NYSE:SCCO) has copper mining, and refining operations in Peru, Mexico, and Chile. This stock has plunged to new lows recently along with the price of copper. The copper sell off has been so extreme that it may have more to do with emotion and forced liquidations rather than major demand issues. If this is the case, copper prices could jump and take this stock along with it. The dividend is very generous and now might be a good time to start accumulating some shares.
Here are some key points for SCCO:
- Current share price: $24.03
- The 52 week range is $24.01 to $50.35
- Earnings estimates for 2011: $2.93 per share
- Earnings estimates for 2012: $3.27 per share
- Annual dividend: $2.48 per share which yields 9.9%
Freeport-McMoRan Copper and Gold (NYSE:FCX) is a leading exploration and mining company seeking to produce resources like gold, silver, copper, cobalt and other minerals. Copper prices can be very volatile and have been dropping because it is widely used in construction. China is a large consumer of copper and recent concerns about the Chinese economy has also impacted this stock. In the long run, demand should rebound and prices for gold and silver remain strong.
Here are some key points for FCX:
- Current share price: $29.87
- The 52 week range is $29.85 to $61.35
- Earnings estimates for 2011: $5.91 per share
- Earnings estimates for 2012: $6.11 per share
- Annual dividend: $1 per share which yields 3.3%
Walter Energy Inc., (NYSE:WLT) is a leading coal producer. This stock was trading over $120 per share and has fallen about 50% in just weeks. This stock was very weak in the last financial crisis and the shares traded around $13 at the lows of 2008-2009. I would watch this one for signs of a bottom before considering an investment.
Here are some key points for WLT:
- Current share price: $56.90
- The 52 week range is $53.41 to $143.76
- Earnings estimates for 2011: $8.04 per share
- Earnings estimates for 2012: $9.87 per share
- Annual dividend: 50 cents per share which yields .8%
Cliffs Natural Resources (NYSE:CLF) is a major mining and natural resources company. This stock was trading for about $100 per share just a few weeks ago and has dropped to bargain levels over global recession concerns. It looks like many investors believe earnings estimates will be revised lower. Even if earnings estimates are reduced, the stock looks cheap enough to start buying a little.
Here are some key points for CLF:
- Current share price: $48.30
- The 52 week range is $47.93 to $102.48
- Earnings estimates for 2011: $13.43 per share
- Earnings estimates for 2012: $14.95 per share
- Annual dividend: $1.12 per share which yields 2.2%
Market Vectors Coal ETF (NYSEARCA:KOL) is an exchange traded fund (ETF) that invests in a number of coal related companies. This is a great way to play the rebound in the sector because it offers the safety of diversification. This ETF traded for about $13 per share at the market lows of the last financial crisis so it could easily go below $25. If it were to trade close to that level again, I would buy heavily. Some of the holdings in this ETF include Alpha Natural Resources and Peabody Energy.
Here are some key points for KOL:
- Current share price: $28.68
- The 52 week range is $28.62 to $51.87
- Earnings estimates for 2011: n/a
- Earnings estimates for 2012: n/a
- Annual dividend: KOL pays a small dividend of about 15 cents which yields about .5%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.