Despite the media’s focus on oil and gasoline prices, investors should remember that electric utilities consume more primary energy than transportation, residential and commercial applications combined. Although coal-fired power plants have come under fire in recent years for their carbon dioxide emissions, these facilities still account for an outsized proportion of US generative capacity. The recent bout of coal-to-gas switching that has occurred at US utilities stems from ultra-depressed natural gas prices, a situation that will reverse once natural gas prices recover to $4.00 per million British thermal units or more. Investors looking to bet on this eventual turnaround and lock in elevated yields should consider two of our favorite coal-focused master limited partnerships.

Over the long term, the supply-demand outlook for seaborne coal prices remains sanguine, largely because of rising demand for electricity and steel in the rapidly industrializing nations of China and India. Growth Portfolio holding Peabody Energy Corp (NYSE: BTU) trade at a substantial discount and represent a solid bet for value-oriented investors.

In This Issue

The Stories

1. Although ultra-depressed natural gas prices have enabled the fuel to win market share among US electric utilities, rumors of King Coal’s death are greatly exaggerated. See North American Fuel Fight.

2. Concerns about economic growth in China, India and other key emerging markets have weighed on names with exposure to international coal markets. Shares of Growth Portfolio holding Peabody Energy Corp (NYSE: BTU) have pulled back considerably over the past year, but the company’s long-term growth story remains intact. See The International.

The Stocks

Penn Virginia Resource Partners LP (NYSE: PVR)–Buy < 29 in Conservative Portfolio
Oxford Resource Partners LP (NYSE: OXF)–SELL in Energy Watch List
Rhino Resource Partners LP (NYSE: RNO)–SELL in Energy Watch List
Alliance GP Holdings LP (NYSE: AGHP)–Buy < 45 in Aggressive Portfolio
Peabody Energy Corp (NYSE: BTU)–Buy < 45 in Growth Portfolio