Thursday, January 6, 2011

BlackRock Sees Coal Stocks Doubling

BlackRock's Daniel Rice told Bloomberg that he could see coal stocks doubling with oil and gas companies lifting only 25 to 30%. Interesting comments because even though we're bullish on coal stocks some of the bargains are in the natural gas and oil service space.

Rice has been very successful over the last decade so maybe we should continue to follow him with our overexposure to coal stocks such as Massey Energy (MEE), Alpha Natural Resources (ANR), and Puda Coal (PUDA).

He does make some interesting points about remaining bullish on energy stocks unless oil surges above $120. Hard to tell if that will be the tipping point as consumers have already tasted that level of oil in the past and since made adjustments, but regardless demand will start to drop when oil rockets above $100. Nobody really knows the tipping point though. Just have to remain on guard.

Rice's largest holding is Massey Energy so he appears to share the same opinion as Stone Fox on that stock. He sees ANR as the best candidate to buy them. After the bell last night, MEE cut Q4 production amounts by a dramatic amount which has to signal that the Board of Directors is left with little option but to sell the company while the assets are in demand. Rice sees Massey as very attractive because of its inventory of undeveloped properties.

The rest of the article has some other interesting quotes from Rice plus comments on oil and other energy prices by other analysts so check it out:


  • The gain may lift shares of oil and gas companies by 25 to 30 percent and help double the price of coal stocks, the manager of the $1.5 billion BlackRock Energy & Resources Fund forecast in an interview in his Boston office. His biggest concern, Rice said, is what happens if oil rises even higher.
  • If scientists find a way to cut carbon emissions from burning coal, a breakthrough Rice thinks is more likely to come from China than the U.S., coal’s potential could be enormous, he said.
  • The price of natural gas sank about 20 percent in 2010 under the weight of abundant supplies. Rice said that while the glut could last through 2011, supplies will begin to shrink in 2012 as exploration firms cut back on drilling. He sees gas prices climbing from the current $4.47 per million British thermal units to about $6.50 over the next two years.

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