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Forget Copenhagen: The coal industry is alive and well

Today's Financial News - Posted December 21, 2009

Forget Copenhagen: The coal industry is alive and wellWe got a rare glimpse of good news for the coal industry today. With word that Bucyrus (NYSE:BUCY) is shelling out over a billion bucks for a competitor’s coal operations, a new lot of profit opportunities are on the horizon.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore — (TFN): This is a big day. In case you don’t know it, my editorial duties extend over to Contrarian Profits, an outlet devoted to the growing tribe of sick-of-it-all investors that believe just about the only thing worth anything these days is gold. Of course, while the nation’s economic strength collapses, we will gladly take advantage of some of the ensuing profit opportunities.

As contrarian investors, we like hard assets, the more down and out, the better. Right now, there is no better tangible good, with a worse reputation than good ‘ole American coal. Politicians hate the stuff, factories love it and investors have yet another shot to get rich off of it.

In 2006, I was a bit of a coal industry junkie. I read books on the stuff, wrote countless articles about my research, even went on the radio, TV and the seminar circuit talking about the nation’s dirtiest fuel source.

In today’s world of “green energy” and global warming scares, coal is a nasty four-letter word. But with a couple centuries worth of the stuff buried underground, we all know that’s going to change. Come the next political campaign or environmental hype, coal will launch back into the foreground.

You know it. I know it. And the folks at Bucyrus (NYSE:BUCY) know it. That is why the heavy equipment maker is placing a $1.3 billion coal-industry bet this week.

In a move that tells Caterpillar (NYSE:CAT) and Joy Global (NYSE:JOYG) that they had better pay attention, Wisconsin-based Bucyrus is cutting a check to Terex (NYSE:TEX) in exchange for the company’s mining business.

Again, this is the kind of far-sighted, buy-when-nobody-else-will move that pays incredible dividends in upcoming years. It’s the kind of stuff contrarians dream about.

Just when the coal industry could look no worse, the sector’s biggest names move their bishops in an ever-lasting game of chess.

Today’s move is beneficial for both sides of the bargain. Terex gets a cash infusion that allows it to concentrate on its core business and Bucyrus gets a hunk of assets that allow it to up the ante versus the industry’s behemoths like Cat and Joy Global.

Here’s what you can expect out of the coal industry over the next year: more consolidation, greatly increased share price, strong demand growth, and, most importantly, better representation amongst the nation’s politicians.

Now’s the time to make your move.

*** I wish I had better news for the gold bugs. It has been dang near a month now since I said to sell the stuff and prices have gone ever since. Don’t blame me. I’m merely the messenger.

There is good news. The downturn won’t last long. It’ll be just enough to get the speculators and the hyperbolic masses off the wagon and then prices will turn north once again.

As soon as the magical metal bars are selling for less than $1050 an ounce, put in your buy orders once again. My take is we’ll see $985 by mid-January, but just in case China makes more waves between here and there, $1050 is a good entry point.

When the stuff is selling for $1250 in April and $1,500 this time next year, the cushion won’t matter so much.


Next Article: Only a few folks celebrating at Sirius

Posted by Andrew Snyder · Filed Under Featuring..., Oil and Energy 

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