Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.
Now that we've got all the pious Earth Day documentaries, photo essays and public service announcements out of the way, it's time to get back to business.
And that means we need to talk about investing for the real world as it exists today, not as it might on some far-off date when all our modern conveniences are powered by love beads, sunshine and sugar beets rather than good old-fashioned oil, gas and coal.
I'd like to return attention to the companies that provide the motive force behind the electronics, vehicles and water heaters that have lifted us above the darkness and despair of the Middle Ages -- and I don't just mean the '70s.
Call it a portfolio for Un-Earth Day.
Coal in Your Stocking
Right now, right here, just for starters, you just have to have some coal-mining companies in your portfolio. Yeah, OK: Coal is stripped out of gorgeous Appalachian and Rocky mountains, it's filthy to handle, and its emissions blacken the sky. But look on the bright side: Nature, not man, made it a nearly perfect and highly economic fuel for power plants -- and it is plentiful in the U.S. Natural gas is slowly gaining on coal as fuel for electricity utilities, but it's way behind and will remain so for decades.
If this disturbs you, perhaps you should try living without your espresso machine, Pilates DVDs or broadband connection for a few weeks. U.S. electricity demand is rising at the rate of 1.5% annually because of all our new plasma-screen TVs, corporate and personal Internet use, iPod chargers and cell-phone towers. Think of all the incremental extra demands you put on the power grid today vs. 15 years ago, including your three home computers that are on day and night, and you realize the extent to which we have become electricity addicts.
Electricity doesn't come from the sky; it comes from coal, plain and simple, although hydroelectric dams, natural gas and nuclear fission lend a hand. Coal prices weakened last year as rising production and ample utility stockpiles provided too much supply in the market. But the supply-demand balance is improving for coal miners this year because of production declines of as much as 3.5%, according to federal regulators.
The reason: Central Appalachia coal miners have closed a lot of high-cost mines while Wyoming-area coal miners slowed production to better meet railroads' capacity to move the rocks south to distribution networks. All the while, a worldwide boost in natural gas prices has made that cleaner fuel less economical.
So which coal miners should you buy? That's pretty easy to answer, as there are far fewer miners than there are oil and gas drillers.