Saturday, September 18, 2010

"If Johnny Cash was still around he might write a song about Coal & Steel and the miners that work down in the earth"

Johnny Cash & Bob Dylan
Dow Jones  10607.85   (UP)  Week ending Sept 17th

Johnny Cash always wrote songs about the folks that had the hardest path in life to survive, like convicts, outlaws, gun fighters, drifters, and people with family tragedies. Generally Johnny hated anything Elitest and always sided with the view of the common man, people like the coal miners. Johnny sang an old Billy Joe Shaver song called "Old Chunk of Coal" and it went something like "I'm just an old chunk of coal but I'll be a diamond some day, I'm goin to get rid of every flaw". Well I have a feelin that those Coal Miners are going to be working even harder next year because that "Old Chunk of Coal" and Coal stocks are going to turn into diamonds next year because of the tremendous demand by Asia-Pacific countries for metalurgical coal to manufacturer Steel.

   This also bodes well for Johnny's other favorite subject "Railroad trains" headin west (and other bulk shippers). But for my conversation I will be speaking about the Coal stocks. These earnings projections for 2011 jumped off the page at me and my financial advisor Vince confirmed  my thoughts with some excellent Morgan Stanley Smith Barney research on the subject. So here goes with my picks.

Arch Coal ( Symbol ACI, $24.71) is one of the best pure Coal plays that you can invest in. earnings projections 2010 - $1.08 per share, 2011 - $2.66 per share, 2012 - $4.00 per share.  Coal companies do not normally operate at high profit margins so this is all going to be volume increases to boast up profits. Those poor coal miners are going to be working allot of overtime and longer hours to keep up. Sing it Johnny, "flesh and blood and toil in those dark & lonely mines". ( I hope the miners have some profit sharing plans!).

Peabody Energy Corp. ( Symbol BTU, $47.00) will also be humming a happy tune with earnings in 2010 of $3.03 per share, 2011 - $4.53 a share and 2012 of 6.26. Try to find another industry projecting this type of earnings growth.  Peabody's 3rd quarter profits were up 35% mostly due to metalurgical coal production and sales. They have a litle bit better return on equity that Arch Coal, (a little more profitable by controling cost, i.e these coalminers are workin hard and are good at their work).

 If you prefer something with a big dividend yield instead in the coal group,  PENN VIRGINIA Group Holdings (Symbol PVG, $22.07) might be your cup of tea.  Penn (PVG) will have the growth in earnings from Coal and will pay you a safe 7% dividend while you wait. Good for IRA accounts to give you some growth and income.

So look for the BLUE logos, make some money, and think
about and be kind to Coal miners like Johnny Cash would.


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