| Stock (Symbol) | Stock Price | |
Peabody Energy (BTU) |
$62 |
|
| Data is as of | Expected to Report | Sector |
December 10, 2010 |
Jan 26 |
Energy & Commodities |
| Sharek’s Take | ||
 The Cheat Sheet says Energy is the place to invest in 2011, and I’m getting a jump start in 2010 by adding Peabody Energy (BTU) to the Growth Portfolio today. Economies are expanding — especially China’s. More production takes more energy. Consider these points on why I think BTU is a fitting investment:
News today that the EPA has pushed back plans to create tougher polution controls for coal companies is a relief to investors of coal stocks. Coal plants have been targets of Democrats who push for clean energy. The problem is better polution control in coal plants is a HUGE investment. Republicans taking more control in Congress is helping coal stocks. Peabody mines coal in Amaerica, Australia and Argentina. Australia provides coal to China’s steel plants — that’s what gives BTU and edge over Arch Coal (ACI). America’s coal consumption is growing because the economy is growing again, China’s is growing either way. |
||
| One-Year Chart | ||
 BTU is a little high right now. I wish I had purchased this stock earlier, the prior breakout was $56 so the $62 price today is still close. Its obvious BTU took off when it was clear Republicans were going to take more control in Congress. I did a lot of research on this sector in last month’s newsletter, we are in the early stages of an energy upswing. I’m OK buying here. |
||
| Earnings Table | ||
 BTU’s profits have been strong for just two quarters, so I think we got in on the early end of the energy upswing. Revenue rose 21% last quarter, profits doubled.The company has been beating the street all year, but I’m not putting a lot of faith in that for the future — coal is a commodity. Commodities fluctuate. Annual Profit Estimates show BTU making around three dollars this year, four-fifty next year and five-fifty the year after — that’s exceptional profit growth and a main reason I like BTU. Future quarters look sensational, with triple-digit growth forecasted. |
||
| Fair Value | ||
 BTU had a median P/E between 18 and 22 during 2002-2006 (and also in 2009). 20 times earnings is a good place for BTU stock. This is solid upside for an energy stock. |
||
| Ten-Year Chart | ||
 Peabody has been a solid, yet volatile, stock to own during the past decade. Although the annual profits are red-and-green, the company has shown the capacity to grow. When I renew this chart next quarter, the 2000 figure will fall off and a 2011 number of around $5.50 will appear, this will make the ten-year chart look so much better. |
||
| Power Ranking | Bottom Line | |
Growth Portfolio
13 of 19 |
Energy should be a top sector in 2011, and we need to have investments in that area. I really like oil but love the profits BTU is expected to deliver during the next two years. I’m also happy that the 14 P/E is less than the 20 BTU usually sells for. I’m not an expert at energy stocks,so I want to get a feel for how this investment is going before placing BPI in my top-ten investments. Thus BTI is ranked 13th in the 19 stock Growth Portfolio Power Rankings. I thought about putting this stock in the Aggressive Growth Portfolio but I like the stocks in there now. The biggest negative is BTU is extended in the one-year chart. If this stock corrects I’ll consider adding it to Aggressive Growth Portfolio. |
|
Aggressive Growth Portfolio
N/A |
||
