Coal Stocks Headed Higher? (BTU, PCX, ACI)

The bull market in resources has not passed up coal. Many leading coal names have been moving substantially higher over the last 6 months, but this trade may continue to work into the second half of 2011. The highest quality name to play a continued rally is probably Peabody Energy BTU. Over the last 3 months, BTU shares have risen more than 14%. In the last 6 months the shares have appreciated more than 43%. The stock trades at a trailing P/E of 25.56, a forward P/E of 12.12, and a PEG ratio of just 0.66. On a valuation basis, Peabody continues to look attractive. Other potential coal names that could continue to see share appreciation are Patriot Coal PCX and Arch Coal ACI. PCX shares have been on fire over the last 6 months, rising almost 125%. This name is much more speculative, however, with a market cap of $2.45 billion. Arch Coal (ACI) has lagged the performance of both Peabody and Patriot, but has put in a very nice base in 2011. Should the stock breakout to the upside from this consolidation pattern, it may have a ways to run. Look for ACI shares to breach the $36.00 level on heavy volume to confirm a potential breakout.