NEW YORK ( TheStreet) -- To say 2013 was a dark year for coal companies would be a gross understatement. The entire industry was off 18% on the year; disappointing, but hardly representative of the bloodbath that occurred when looking at individual performances.
The industry's 2013 performance, highlighted by a 42% stock price decline from Arch Coal (ACI - Get Report), marked a 7% improvement from three years ago when the group shed more than 24%. While this high-risk commodity business surprised no one with its struggles, I don't believe anyone anticipated that the 29% decline in Peabody Energy (BTU - Get Report) stock would have been considered a "relative outperformance."
Notice how coal aficionados hold their convictions. Despite negative momentum within the industry, many investors, including those in Liberty Coal (LYRTF) and Colombia Energy (CERX), stubbornly rode their investments down to 100% declines, insisting that "the Street had gotten it wrong."
While trying to "time the bottom," some investors learned the brutal lesson that things can always get worse.
Unlike the underlying operational struggles that have hurt its peers, I believe Alpha Natural Resources (ANR) has the management in place to capitalize if/when coal gets out of this funk. And this includes having posted gains of more than 50% since August. But I'm not going to make the same mistake and assume that Alpha Natural is immune to the industry's woes. This company still has issued related to debt that it must overcome.
That said, as with anything else, I believe the timing is right, given the fact that not only does domestic thermal coal inventories continue to trend down, but there are also decent (I won't say great) advances in metallurgical coal. Not to mention, Alpha Natural will enter 2014 trading at or near its all-time lows.
Obviously, I can be wrong here. Lacking a crystal ball, there is no way to know where the market will go in 2014. But here we have modest evidence of a coal recovery, coupled with a depressed stock that just posted sequential improvement in revenue. If that is not the recipe for a good bet, I don't know what is.