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Martin Tillier

Martin Tillier

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Surprising Opportunities In Coal

Long term subscribers and those with a long memory may remember that back in August of last year I wrote a piece on coal stocks. At the time I described them as too risky for investors and suggested only one trade, shorting Westmorland Coal (WLB) which, at the time looked seriously overvalued. That trade worked out well as WLB fell from there, dropping around 40 percent until bottoming out earlier this month. That wasn’t the only coal stock to fall in that time. They pretty much all did, but now the risk/reward ratio has shifted enough to make investing in the sector worthwhile for those who don’t mind taking a risk.

The dramatic fall in WLB and others was, at least in part, due to the drop in oil prices, but that had another effect. While the cost of energy was not the point of those who railed against coal and other traditional energy forms, it did lend an economic argument to calls for greater restrictions on fossil fuels and more investment in alternatives. As prices have fallen, the case for transforming electricity generation around the world has seemed less urgent. That observation may be somewhat cynical and it may upset those committed to the environment, but it is a simple fact, and one that can be profited from.

Without regular demands for the effective destruction of the coal industry some existential risk has been removed, allowing potential investors to focus on a couple of relevant, more positive facts. According to the IEA, coal…




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