We all remember the internet stock boom in 1999. Investors made a lot of money and there was no end in sight for stock prices that year. Euphoric feelings had the bulls on parade on Wall Street. Recently, the energy bull market has created a similar euphoric feeling for investors of coal stocks.
Coal stocks such as Massey Energy (NYSE:MEE), Peabody (NYSE:BTU), Arch Coal (ACI), Alpha Natural Resources (ANR), and Patriot Coal (PCX) saw their stock price double or in some cases triple in the last year. The dirty, filthy, black stuff has coal investors dancing the funky-COAL-medina. Good old coal is cheaper to run a power plant than oil or natural gas, so utility companies throughout the world love using it. Coal miners in Pennsylvania can earn over $70,000 a year to keep up with the demand. Recently, every time these stocks dip in price, a buying opportunity is created.
The problem: coal pollutes the air more than the other fuels so its continued use will be subject to stricter clean-air standards and the political policies that will enforce those standards. So, coal investors will need to keep abreast of all new energy policies in the U.S. and abroad to gauge how long the coal party will last. However, for now, they can keep partying like it's 1999 and enjoy their gains.
Position: No current position in coal.