Say I offered you the opportunity to invest in either a renewable-energy project or a coal mine…
Which would you choose?
I suspect the renewable-energy project would garner more votes if I posed that question to the general public. But my readers are smarter than that.
Under the right circumstances, both investments could result in big profits. But I believe the odds of the greatest profits are in coal mines. Let me explain. What I have to say may surprise you…
Here in the U.S., we commonly see headlines about coal power plants shutting down and less mining of the mineral in general. But in Asia, another story is brewing. And it’s one of increasing demand and the use of coal as an energy source.
That’s right, folks. Coal is making a comeback.
Last year, global coal usage increased 2.6% to a new record. A large portion of that increase came from two of the most populous countries in the world – China and India. Electricity demand is growing there as more people are moving into the middle class.
But we didn’t just see growth in these two Asian countries. Coal operating capacity around the world increased on an annual basis for the first time since 2019. And it was the largest growth on record since 2016.
Power demand in India is expected to double within the next decade. So it makes sense that the country has plans to increase coal production by 10% to meet demand. China will add to its coal producing capacity in the coming years as well. And here in the West, the closing of coal power plants should slow.
Yet global coal production is still likely to drop here in 2024.
What does that mean for opportunistic investors? It’s simple economics. When demand rises and supply decreases, prices rise. So investors shouldn’t be sleeping on this space right now.
Just take a look at the performance of coal-related investments over the past three years…
As you can see above, the Dow Jones U.S. Coal Total Stock Market Index is up 92% over that time frame while the S&P 500 has gained just 22%. Meanwhile, the Nasdaq Clean Edge Green Energy Index has lost 44%.
Now, the past doesn’t dictate future performance. But it’s certainly a good indicator.
It’s a near certainty that demand for coal increase as general energy demand increases. And what else is contributing to growing energy demand – other than population growth and people moving up economic ladder in Asia?
Artificial intelligence (AI).
Regular readers know the impact that this technology is having on electricity demand and our power grid. As AI engrains itself deeper into the everyday lives of companies and individuals, more data will be generated. And that means a lot more electricity will be required to collect and analyze all that data.
This will create an abundance of opportunities for long-term investors. Think nuclear energy, the power grid, and infrastructure companies – to name a few.
And of course, you should be looking at the coal industry.
Many people believe that coal is on its way out the door. But I expect coal will be a necessity over the next decade as electricity demand grows rapidly and renewable energies won’t yet be able to supply enough to officially retire the coal plants.
You can bet I’m keeping a close eye on the space for near-term investment potential. My subscribers will be the first to know when the time is right.
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