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Global Coal: A New Profit Source

Posted February 17, 2008

"With oil prices flirting with the $100-dollar mark, energy demand at record levels and new coal-fired power plants popping up nearly every week across the globe, the coal industry is a solid one.  " – Andrew Snyder 

By Andrew Snyder

Baltimore (TFN) — It was about ten years ago when I first realized this world's addiction to coal and its huge impact.  It came at a rather weird time.  I was rafting down a rural river (the same one Deliverance was filmed on), hanging onto any piece of the boat I could sink my nails into. 

Fortunately, the only things squealing like a pig that day were the air brakes on the countless trains that were a constant attraction beside the river.  Every half hour or so, a new train, loaded with thousands of tons of freshly mined coal passed by.  The amount of coal being moved was stunning.

That was over ten years ago.  The world's demand for coal has increased exponentially since then.  Today's figures are absolutely incredible.  Each year, we consume over 6.2 billion tons of coal.  The vast majority of it is burned to produce electricity.  Consumption is expected to rise by at least fifty percent over the next few decades.

Squeal like a billionaire 

For investors, demand like that spells profit potential.  Until recently, it was hard to properly play the coal market.  Investors had to pick a handful of potential winners and stick with them.  If one of those companies had a rough year or took a downturn, serious damage could be done.

Fortunately, there is now a fantastic way to play the entire coal industry, not just bits and pieces of it.  Van Eck's Market Vectors Coal ETF (KOL:NYSE) gives investors a healthy shot of the entire global coal industry, from China, to India, to the United States.

Some of the fund's largest holdings are some of my favorite industry players.  From China there is China Shenhua and China Coal Energy.  From the United States, there are Peabody Energy and Joy Global (a machinery giant).  And from India there is Bumi Resources, comprising over 7% of the fund. 

Safe and Secure

With oil prices flirting with the $100-dollar mark, energy demand at record levels and new coal-fired power plants popping up nearly every week across the globe, the coal industry is a solid one. 

It won't take wild downturns on economic whims.  Bernanke can do what he chooses to interest rates and the coal industry will not be impacted one way or another.  And there is no way global power demand is going to begin to contract anytime soon.  Remember, once a new power plant is up and running, it will stay that way for a very long time.

If you are looking for a solid long-term investment without much downside, take a long, hard look at the coal industry and this brand new ETF.  It could be the fuel source that powers your portfolio for a long time to come.

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Posted by Andrew Snyder · Filed Under Oil and Energy 

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