Coal stocks have given traders and investors a spectacular run the last five years. We think it's time for investors to use the rallies now to think about lightening up their positions. Look at the gains for some of the names based on recent highs they hit in recent weeks.
- Walter Industries (WLT) stock is up 1,200% -- dividend yield is now 0.22%.
- Massey Energy (MEE) stock is up 800% -- dividend yield is now 0.30%.
- Peabody Energy (BTU) - Get Report stock is up 1,200% -- dividend yield is now 0.37%.
- Arch Coal (ACI) - Get Report stock is up 700% -- dividend yield is now 0.53%.
- Consol Energy (CNX) - Get Report stock is up 1,200% -- dividend yield is now 0.49%.
The stocks have now begun to have a fairly decent-sized correction. It's one that we think will bounce up this week, but we believe that will be an opportunity to trim some of those gains. We saw a deal this week to buy
Alpha Natural Resources
that failed to lift the sector, and that was something that we feel may be an omen for the coal sector.
We have started to take some coal names (ACI, CNX) off the "Recommended" list this past week and if our research is right, there will be more coal plays following them off the list.
For investors, the hardest thing to do is to sell stocks that have treated your portfolio as well as these coal stocks have done. One of the things to remember is that, often times, the best time to buy stocks is when nobody likes them. Eight years ago, coal stocks were in the dumps and investors were printing money with internet stock profits.
We all know how that ended. The energy crisis is not over by any means, but with the backlash we have seen in the media aimed at energy executives and the sky-high price of oil and gas, we think the consumer is starting to be proactive when it comes to conserving energy (dealers can't sell hybrids fast enough).
The dividend yields (shown above) will not support investors with any decent-sized drop in stock price from these levels. Combine that with the slowdown we are seeing in economies worldwide, and we believe the rotation out of coal stocks, as well as other energy sectors may have started.
This article was written by a staff member of TheStreet.com.