The Fed's Caution Drives Up Utility Stocks (Part 11 of 11)

(Continued from Part 10)

The US coal industry has been going through a rough patch, especially since the turn of the decade. While domestic demand is hurt by the shale gas boom and regulations from the US Environmental Protection Agency requiring power plants to reduce emissions, the global market is battling oversupply and slowing global growth. On the top of these challenges, governments around the world are revising their energy policies to boost cleaner fuels. American coal is at a disadvantage when it comes to exporting coal to high-demand countries in Asia, as four of the top-five coal-producing countries in the world are located in or surrounding the region. As a result, coal stocks are on a decline.

Most coal stocks gained last week, except for Alpha Natural Resources (ANR), which lost 9%. Peabody Energy (BTU) gained 12% during the week and ended the week at $6.14, with a market capitalization of $1.7 billion. Peabody Energy issued $1 billion in new debt, partly to refinance debt maturing in 2016. With a coal price recovery out of sight, the move gives the company some financial flexibility and, more importantly, time. Arch Coal (ACI) gained 3%, while Cloud Peak Energy (CLD) gained 9%. The Market Vectors Coal ETF (KOL) gained 3.8%. Around 35% of KOL’s total holdings are in American coal companies.

Three of the five coal stocks in our coverage have reduced to penny stocks. Alpha Natural Resources closed last week at 83 cents, Arch Coal closed at 90 cents, and Walter Energy (WLT) closed at 57 cents.

Browse this series on Market Realist:

• Part 1 - Why Coal and Power Indicators Matter for Long-Term Investing
• Part 2 - The Latest Natural Gas Inventory Report Proves Neutral for Coal
• Part 3 - Why A Marginal Rise in Natural Gas Prices Helped Coal