Coal is election's big winner
Forget the sweeping macro claptrap that isn't going to happen. The coal industry put its money on the right candidates, and it got what it paid for. Here's a coal stock to play the outcome.
Let others pontificate on whether the president will swing a petulant, defiant left or a conciliatory right. The media and blog pundits can have all the fun they want speculating on the impact of the Tea Party, or lack thereof. We will hear endless commentary on winners and losers.
I couldn't care less.
I know who the biggest winner was last night: coal.
Coal put its money on the right candidates. It made some solid investments in people like Roy Blunt of Missouri, Joe Barton of Texas, Nick Rahall of West Virginia, Ohio's Rob Portman and West Virginia's Joe Manchin. All received sizable donations from the industry. All won big.
That's on top of the $300,000 the mining "interests" gave the political action committee of John Boehner, the speaker-elect from Ohio. (All according to The New York Times.)
I can't think of anyone who cleaned up as well as dirty coal last night.
When you are thrust into the limelight on TV, the Web, radio, print, whatever, and asked about the impact of the election, it's always a troublesome moment, because they want big sweeping statements so they might have you back or give you more airtime next time. But if you have enough airtime and you have enough ink already, cyber or otherwise, it's a great opportunity to stop with the sweeping macro nonsense that isn't going to happen. It's a delight not to have to create wisdom about the tectonic shift in government.
It pays just to say "OK, go buy" and leave it at that.
So go buy Peabody (BTU).
Here's why: Gridlock may be a recipe for getting nothing big done, but the people coal put its money behind have a simple to-do list, a simple favor list, and that's to get the Environmental Protection Agency to back down so the coal companies can make more money.
Oops, wait a second. I didn't mean to tell the truth so starkly. There's always a way you can justify taking coal's money while being thoughtful. In this case, the pols always say the EPA will cost us jobs and hurt our domestic security if it cracks down on coal. Unfortunately, any rigorous analysis would tell you that isn't true.
First, if we close coal plants, we have to build new plants, and new plants put more money to work than just using old coal plants.
Second, the new plants would most likely run on natural gas, and the natural-gas industry would hire more people in a few months than the declining coal industry could put to work for years if the nation switched base-load fuel sources.
Finally, domestic security isn't on the line, as we have as much domestic natural gas as coal. But it sounds good.
The investment coal made in these politicians will allow the industry to pressure its new representatives and senators into cutting back funding for the EPA and heckling the EPA and wearing it down so it doesn't do its job minimizing pollution that comes from coal.
Recently, Brendan Gilfilian, an EPA spokesman, told the Times, "EPA does not have a problem with coal, or any other industry." Pretty funny; of course it doesn't. It's coal that has a problem with the EPA. You can't buy the EPA, which is a shame for the coal industry, because it would be a lot cheaper. But you can buy "mind share" with these senators and representatives.
Now, why BTU and not the others? Money can't do miracles. The pols can't call in the EPA and say, "Look the other way with coal." That won't fly, because in the end we have a bit of democracy in the country still. There is a degree of agency independence with the Democrats who run the EPA.
But they can pressure the EPA to see it from coal's point of view, to continue to allow cleaner coal to be burned. That's a decent compromise. Plus, the EPA can still go after the more egregious environment-destroying coal companies -- degrees of hell, so to speak -- which means cracking down on mountaintop mining.
Who has the cleanest coal? Who creates the least mountaintop destruction in extracting coal?
Why, Peabody does.
Peabody was already doing a blazing-hot business with China going into the election, courtesy of its Australian operation. But these crucial investments in Congress are worth a lot more than any crucial investments in mining equipment for Peabody.
The coal industry's dollars could directly impact BTU's bottom line. That brings me back to the first precept of investing. Almost every single piece of claptrap I have read about what will happen in the market because of the election is wrong, because almost none of it impacts what drives stocks -- corporate earnings.
Except this coal investment.
I think that it could bump BTU's $4.57 earnings estimate by as much as 50 cents in more business here, a combination of less inspection and more pressure to use cleaner burning coal rather than shut down plants which had kept a lid on BTU's numbers.
Let's say BTU earns $5. The best energy growth name selling at less than 15 times earnings? Seems silly.
Raising numbers on BTU. Taking price target up to $75.
Now, there's Washington to Wall Street for you.
At the time of publication, Cramer had no positions in the stocks mentioned.
Click here to follow Cramer's trades for his Charitable Trust.
What makes some sence today may not make Cents tomorrow.
I like BTU have traded this one for years with excellant results, but the coal industry may very well get **** handed to them at some point down the road.
I am from Kentucky and we love coal and whiskey. With all these rep in office the rich get richer the poor get drunker.
His reason for closing plants are 1) building new plants creates jobs and 2) switching to natural gas creates jobs in natural gas industries. 1) The new jobs created to build plants would be paid by utility customers (businesses) paying higher electricity rates for the same service. Utility customers would then replace the money spent on productive workers with money spent on increased energy expenses. 2) The jobs created in the natural gas industry would be offset by the jobs lost in the coal industry.
The only reason to try to ban coal is that you still believe Al Gore's nonsense. If that is the case, you need more help than him.
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Do it once a year. This allows the best-performing asset classes to take off and run.
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