The companies that mine the coal used for steel production are getting a big boost from China, while those mining coal for energy are having the same problem as natural-gas drillers — very low prices.
Thermal coal prices have "pretty much bottomed out" while coking coal is "driven by China ," CLSA analyst David Lipschitz told CNBC Thursday. Coking coal is used in making steel while thermal, or steam, coal is used in power generation.
Lipschitz sees production cuts coming on the thermal side because of the low prices, and that means "you'll see prices stabilize." At the same time he sees coking coal prices, which dropped from over $300 a ton to the current $210 a ton, coming back up, and any company on the coking side will be a good investment.
One of his top picks is Alpha Natural Resources , which bought Massey Energy. After being criticized for perhaps paying too much for Massey, Lipschitz believes the stock still has room to go up.
"This is one of the top names in the space because even though they’re not going to do well this year, they’re going to have to cut more production," he said. "They’re still going to generate some free cash" because capital expenditures have been cut back.
He also thinks it's a good opportunity to buy shares of Walter Energy at current levels. Consol Energy is another of his picks.Page 1 of 7 | Next Page