Coal: A "Hot" Commodity
12/31/2004 12:00 am EST
Last year, Eric Roseman chose a little known insur er, Kingsway Financial, as his top pick. It has since risen 35%. Now, he looks to another little recognized firm. His 2005 pick is a coal company whose recent IPO, he notes, was "barely noticed by the herd."
"Coal, easily the cheapest source of energy for countries worldwide, is not only seeing record consumption but also now heading into deficit as production lags demand. Spot coal prices have more than doubled since 2001 and continue to rise. In my opinion, coal is without a doubt one of the hottest commodities in the 2000s. Thus, for our 2005 pick, we suggest investing in coal’s fantastic long-term fundamentals with a recently-issued, but barely noticed IPO— Foundation Coal Holdings (FCL NYSE).
"The company went public in December at $22 a share and we think you’re going to see this stock fly as earnings surge, coupled with manic investor demand— especially if oil prices continue to rise as I expect next year. Foundation Coal is one of the largest coal companies in the US, producing about 70 million tons of coal per year with nearly two billion tons of proven coal reserves.
"Right now, coal is in a massive bull market. If you thought Internet stocks were outrageously priced in the late 1990s, wait until you see what happens to some sectors of the resource market by the time this mega-trend peaks. Coal is definitely at the forefront of this natural resource bull market because demand is growing out of control while at the same time, cleaner-burning fossil fuels like natural gas are expensive, particularly for most emerging markets."