Tuesday, July 24, 2007

Coal stocks and the Citigroup Downgrade

First, if you didn't see it, C's John Hill did an across-the-board downgrade of the coal stocks.

Here's MarketWatch's report from a few days ago:

According to a note from Citigroup analyst John Hill, the industry has missed a critical window in its business cycle, unexpectedly losing market share to natural gas in the power-generation business - by far its biggest market.

Hill also said the industry's profits have been hurt over the past three months by the struggle to squeeze higher prices out of well-supplied utilities and by weather-related delivery problems, especially in the Midwest.

"Our sense is that coal has missed a critical time window, which potentially throws any recovery out-of-phase, with implications that could last for a year or more," Hill said.

Hill has a pretty good grasp of the industry and his timing ain't bad either. Here's the ten day chart for the biggest coal miner, Peabody Energy.

In mid-April he recommended purchase of the group:
"Citigroup advises to buy coal equities as U.S. coal markets gradually tighten"
(from Mineweb)
and caught a ten-percent move in a boring group.

Not afraid to change his opinion when the situation changes. Maybe someone to listen to