Cramer's Coal Stock Plays
Posted on June 18, 2007 at 21:17 PM EDT
Market players should always pay attention to Congress for ideas on how to invest your money, Jim Cramer said. Jim originally thought that the Democrats would think coal was too dirty but Jim recently read a article in The Washington Post on how the Dems want a coal-to-liquids energy plan. "America is the Saudi Arabia of coal," he said. "Our coal sources are safer, cheaper and more stable than our sources for oil." Plus, China is going from an exporter to an importer of coal next year, Cramer pointed out. This means coal is a "ROWer," or rest-of-the-world play, with China being a large consumer. It's true that Goldman Sachs downgraded the coals recently, he said. Jim thinks investors should take the gift of lower prices from the Goldman analyst. Goldman is saying that the coal-to-liquids technology is a "pipe dream," Cramer said. But at this point, he believes that investors shouldn't care. All that matters right now is that the anticoal Democrats are now getting on board. Jim wants market players to look at Consol Energy Inc. ( CNX ) and Arch Coal Inc. ( ACI ). If he had to choose, Cramer said he'd go with Consol, because it has the highest cash margins and because much of its coal production is "locked in," making it more stable. In addition, it has about 64 years worth of reserves and could even be a takeover target, he said. "Coal is still king," Cramer said. If people feel like taking a chance, Arch Coal is for them, and if they don't, they should take a look at Consol, which is "better balanced and less risky." Jim's favorite coal name is Peabody Energy Corporation ( BTU ). Jim likes Peabody's exposure to China and India. Moreover, the stock is "cheap" now and "well behind" where it should be, given the spike in oil, Cramer said. Peabody has been smart, acquiring and divesting itself of different assets to become a "leaner, meaner" coal company, which is what Wall Streeters look for. Further, Peabody has "great visibility," he said, and is set to establish the first coal-to-liquids facility in the U.S. this year. It is the less-risky way to play the technology, Cramer said. WATCH PART 1 HERE WATCH PART 2 HERE
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