Patriot Coal: Death Rattle or New Birth?

Sep.24.08 | About: Patriot Coal (PCXCQ)

Patriot Coal Corporation (NYSE:PCX) started this morning by gaining 4%, but soon after lunch traders changed their mind and pushed the stock down nearly 5%. Why all the confusion?

Patriot Coal is the third-largest coal producer and marketer in the Eastern U.S. And it’s perfectly positioned to profit as the weather turns colder and we turn on our heat. So why would the stock price be falling?

Well, the short answer is "oil prices." And the long answer is, "you see, there was a shortage of energy, and now there’s not so much." Coal prices fell along with the rest of energy when oil proved it couldn’t maintain $140… or even $114. And Patriot and its compatriots have lost a lot of value in the eyes of investors since then.

Patriot peaked around $80 in mid-June, but now it’s running below $40. That’s a 50% drop in little more than three months. And it doesn’t look like it’s over.

When Patriot sent out an announcement about its sales and marketing structure, we all thought something had changed, only to discover it was simply an outline of the company’s existing sales system in the form of a press release (also known as "free advertising")… And a bounce that began last week petered out into nothing today. Too bad.

But some analysts believe the crash isn’t going to continue. What do you think? Are the old cyclical laws of energy dead? Or will coal see a renaissance as temperatures fall? Let us know where you think coal companies, the unsung victims of the oil collapse, are headed this fall. Just drop a line in the comments section below.

Disclosure: none