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Coal, Peabody Energy Are Bullish in the Long Term -- Here's Why

Stocks in this article: KOLBTUUSOUNGCATJOY

As the chart below shows, there are three basic ways to invest in the coal sector. Market Vectors Coal allows for a deep and wide exposure. Buying stock in Peabody Energy results in a deep and narrow position. There is more diversity along with the upside from other industries that shares in Joy Machinery and Caterpillar entail.

Security

Price (approx.)

Median Analyst Target Price over Next Year

5-year High

2014 Performance

Exposure to Coal Sector

Market Vectors Coal (KOL)

$18.70

none

$60.30 (June 2008)

-5%

Deep and Wide

Peabody Energy (BTU)

$16.40

$22

$88.69 (June 2008)

-15%

Deep and Narrow

Caterpillar (CAT)

$108.75

$112

$116.25 (April 2011)

21.20%

Correlated

Joy Machinery (JOY)

$61.70

$62

$103 (April 2011)

6.5%

Correlated

Source: Finviz, Yahoo! Finance and MSN Money.

Despite "war on coal," the sector is not going away. That makes Market Vectors Coal and Peabody Energy attractive investments for the long term. As the chart shows, each security is well below its five-year high -- when China was booming. Based on big money buying, that looks to be returning.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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