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F. A. Piocos
F. A. Piocos


March 03, 2007 | About:

As you know from my previous article, I like value stocks that pay dividends.

I also like coal. So it was only natural for me to find a value play in the coal industry.

On the domestic front there is Arch Coal Inc., (ACI). Arch Coal currently has a PE around 17, a dividend yield of 0.8%, and an ROE around 17. There is also Peabody Energy Corp. (BTU). Similar to Arch Coal, Peabody currently has a PE around 17, a dividend yield of 0.6%, and an ROE around 17. Consol Energy, Inc. (CNX) currently has a PE around 16, a dividend yield of 0.8%, and an ROE of 39%. In addition, there is Massey Energy Co. (MEE) which currently has a PE around 42, a dividend yield of 0.7%, and an ROE around 5%. Manufacturers of turbines, which convert coal into electricity, include General Electric (GE) and Siemens (SI).

For growth investors there is Anglo American PLC (NASDAQ: AAUK). However, right now, I think the best value play is Sasol Ltd. (NYSE: SSL). Sasol is a South African Company that, among other things, uses coal to liquid (CTL) technology to produce various synfuels. Sasol has the 3Ms; the money, the management, and the moat to be considered a great long-term investment. Sasol currently has a PE of around 13, a dividend yield of 3.6%, and an ROE around 29%. For more interesting reading, I suggest you visit there website at www.sasol.com and also read there newsletter which is issued every six months.

About the author:

F. A. Piocos
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now pre-order his book Invest Like a Guru on Amazon.

Rating: 3.5/5 (11 votes)


BxCapricorn - 9 years ago    Report SPAM
Take a look at the cyclical nature of Arch Coal (April/May) and that tells you it may be time to buy in the next month or so. I like Sasol, and was surprised it took a 10% hit during the market correction. I'd buy at $28, but I think everyone is getting wise to it and it's CTL potential.

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