"Peabody Energy (NYSE: BTU), the largest private market coal firm in the world, had a great 2008," says Jack Adamo who has recently added the stock to the buy list of Insiders Plus.
"Peabody has extensive holdings in the U.S. and Australia, the latter serving the China/Asia Pacific markets. It sells steam coal for heating and utility use, and coking coal for steel making.
"Peabody has had some decent iInsider buying in the last few months -- about 30,000 shares -- not enough to get too excited about, but encouraging. There were also 27,000 options exercised, most of it at very low prices, for which the holder took no profits.
"That's also a good sign, particularly since those exercises come with a tax bill, and shares weren't sold to pay it. It implies faith the stock will rise.
"In addition, this type of activity is not closely monitored by most Insider watchers; so it's less likely to be a public relations ploy, as much Insider buying is nowadays.
"Peabody had a great 2008 and a great fourth quarter, with revenue rising 61% and diluted EPS up 48% over Q4 2007. But the company, like the whole industry, expects the pricing environment to be tough this year, with demand down substantially, particularly in coking coal.
"The stock is selling for under $29 after reaching a 52-week high of $88. We sold it last September for a 68% profit after holding it slightly less than two years.
"Earnings estimates for full year 2009 run at $3/share, with a 20% increase in 2010. I doubt either estimate is reliable. But this is the best company in its industry and it's selling for less than 10-times earnings, albeit shaky earnings, given the environment.
"I have no illusions that if the market craters again later in the year, as it almost certainly will, these shares couldn't fall 30%. But the on-balance-volume is very strong in the stock, indicating it is under accumulation by big investors. If the market has a good couple of months, the shares should put on enough padding to weather the downturn."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
