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Top Energy Play

Posted May 5, 2008

“There are 1,000 coal-fired plants scheduled to be built within the next five years. That’s more than enough to keep the supplies tight and to sustain the high price of coal.“ — Andrew Gordon, Investor’s Daily Edge

Baltimore – (TFN): The following was taken from this week’s Market Insights with Krista Das featuring Andrew Gordon, editor of Income. Watch this video.

Krista Das: First and most importantly, do you see a continued growth in commodities or are these markets about to reach their peak just like they did in previous recessions?

Andrew Gordon: I really don’t see the commodities reaching their peak any time soon.You know, Krista, it would be different if the commodity boom was driven by U.S. growth, but in fact it isn’t.

In Russia, China, Brazil, India, Mexico, Korea, in a dozen more countries we’re seeing double digit economic growth or near double digit economic growth.

Now, will this growth take a hit from what’s going on in the U.S.? Certainly it will. But let’s take China for example. What’s going to happen with China is that you’re going to see roughly ten to 11 percent growth get ratcheted down to something like nine, nine and a half, maybe ten percent growth.

The global growth story is still in tact. I don’t see anything going on moving into the future that is going to really kill the commodity boom. It’s alive and well.

Krista Das: So which commodities should investors focus on?

Andrew Gordon: Well, commodities are rising across the board. You have a choice of a couple dozen commodities. I like coal, Krista, and I’ll tell you why. I like the big round number behind coal and that number is 1,000.

There are 1,000 coal-fired plants scheduled to be built within the next five years. That’s more than enough to keep the supplies tight and to sustain the high price of coal.

Krista DasRather watch the financial video? Click here.

Krista Das: Now I understand that countries like China and India rely heavily on coal to fuel their expansion, but aren’t there any other alternative energies out there that they could turn to.

I mean with the campaign for fighting global warming, I would think that there would be pressure on emerging markets to use clean energy and doesn’t coal – coal plants, don’t they cause a lot of pollution problems?

Andrew Gordon: You know, Krista, there are a lot of exciting alt energies out there. And one day they’re going to make a big difference. That day isn’t today. It isn’t tomorrow. Alt energies are still too expensive. They’re very hard to scale out. Their day is coming, but it’s not now.

The only alt energy, if you want to call it an alt energy, that can compete with coal in terms of cost and the ability to scale is nuclear.

Well, the fact is these countries have very ambitious nuclear power plant construction plans and they’re going to need it. These countries are going to be building these nuclear power plants and the 1,000 coal-fired plants and cross their fingers that that’s going to be enough energy to propel their economies.

Krista Das: Now do you have any stock recommendations for commodities investors?

Andrew Gordon: Yes, I do actually. I have a very interesting company called Bucyrus. Bucyrus makes coal mining equipment, both underground and surface. They’re out of Wisconsin. They’ve done tremendously well.

You look at their chart. They’ve been growing by leaps and bounds. They export to the big mining companies in China and Chile and other Asian countries.

The thing I like most about this company is that it has a huge after sales market. Actually when it makes a sale, it makes more money on the equipment maintenance and spare parts that comes from the sale than the sale itself.

It’s doubling capacity of its spare parts. It’s quadrupling its welding capacity. It’s finishing a factory that will be making 24 more of its gigantic shovels every year. It’s expanding. It has to expand. Business has been that good. This company is perfectly positioned to ride the wave of coal expansion in the future.

Krista Das: Okay; so Bucyrus and which exchange does that trade on?

Andrew Gordon: The New York Stock Exchange, Krista. ____________________________________________________

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