Stupid Stock Move of the Day! Peabody and other coal stocks up?May 29, 2012: 2:24 PM ET
Cue the theme from The Muppet Show. Peabody Energy (BTU) surged 4% mainly because analysts at Goldman Sachs (GS) decided to upgrade the stock to a buy. It's a bit curious.
Coal stocks have had a wild ride lately. The Market Vectors Coal Index (KOL) ETF is down nearly 20% YTD. Patriot Coal (PCX), which also surged Tuesday, has been hit hard lately due to concerns it may file for bankruptcy. This is a tough sector to be in right now. Sure, some might be betting that if there's a change in leadership in Washington, that could be good news for coal. Jim Arcadipane, who goes by the moniker Kawfeeman on StockTwits, tweeted the following question. " everyone looking at a change in administration ? if so, BIG TURNAROUND for $KOL ?"
Perhaps. Republican presidential contender Mitt Romney has recently been making the campaign claim that the White House has been bad for coal producing states. But President Obama has pushed clean coal throughout his tenure. The bottom line is that Peabody, like many coal companies, has been hurt by low natural gas prices as coal is no longer viewed as a dirt cheap form of energy. I wrote about that back in mid-March, back at a time when some investors appeared to be foolishly buying coal companies on the hopes that Warren Buffett's Berkshire Hathaway (BRKA) (BRKB) might acquire a miner.
Earnings for Peabody are expected to decline this year, making it more difficult to figure out if the stock is really a bargain at 9 times 2012 forecasts. Sure, that's a cheap multiple. But what if analysts cut estimates further. Then the stock will be as sought after as ... well, a lump of coal in one's stocking at Christmas.