If you want to invest in an energy resource that’s cheap, has a
dependable supply and a proven track record, don’t forget about coal.
In the very (very) distant term, it may become out of date, but for the
foreseeable future coal is an excellent investment for an energy source
that can immediately step in to cover the rising cost and dwindling
supply of oil, while alternative energy sources need to be more fully
developed before they can take by as primary suppliers of electricity
and more.

And whether you’re going to invest in coal, Peabody Energy Corporation (NYSE:BTU)
is an excellent bet. Frequently considered the best coal producer in
its course, Peabody has the resources and size to weather any blips in
the sometimes volatile coal market. Its U.S. operation is immense — in
2006, 20% of all coal mined in America was produced by Peabody, and
nowadays, 10% of electricity produced by any source is fueled by the
company’s coal.

By far the most profitable part of its
American operation are the company’s mines in the Western states,
primarily in the Powder River Basin in Wyoming and Montana, which
explanation for 75% of Peabody’s production. By contrast, the Eastern
states production is less profitable, mostly due to transportation
problems. To that end, Peabody has recently spun off Patriot Coal Corp.(NYSE:PCX),
based out of Appalachia

and Illinois, which analysts say should reduce
costs without having a meaningful affect on the income stream.

Beyond the U.S., however, Peabody is set up to take great advantage of
the current coal boom in Australia, where the demand for metallurgical
coal, which is used in steel production, is growing as Asian countries,
particularly in India, are spending meaningful resources to build up
their infrastructure.

In 2006, Peabody acquired Excel Coal
Ltd (previously ASX: XEXL), a coal mining company operating out of
Sydney, which tripled its presence in Australia. There are some
problems on the Australian market, primarily concerning bottlenecks in
distribution, but Peabody and the rest of the industry are investing in
increased dock capacity to address the issue. The effects of that work
won’t be felt for another year or more, but as I think that is a
company that will continue to grow at home and abroad, it will be worth
the wait.

Type of Stock: Peabody Energy Corporation is the world’s largest private-sector coal company.

Price Target:
Bear Sterns estimates that that will hit $62 a share by the end of
2008. Buying in the mid-$40’s would form for a potentially excellent
upside return.

Original post by Beth Gaston Moon

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