It was interesting to see that President Obama nominated Sally Jewell, CEO of REI, to be the new Secretary of the Interior. Jewell’s a business leader and outdoor enthusiast. It made her a good choice to head the privately held REI and it makes her a good choice to head the Department of the Interior.
But not an obvious one. Yes, by appointing an apparently apolitical business leader who runs a massive outdoor retail chain there’s the obvious link to her loving natural parks and the great outdoors and such. But a more careful consideration should remind investors that the Secretary of the Interior also has a large influence on extraction industries. And that’s not a small thing.
The natural gas boom under way in the United States is something that has the chance of revitalizing the economy. The expansion of jobs, companies and so forth may just be a transformative one for areas often skipped by economic expansions. From the Dakotas to Appalachia the gains are coming quickly to areas mostly ignored by both the political and chattering classes.
So what’s going on with firms in the extraction business? I think that’s worth a look.
Alpha Natural Resources, Inc. (NYSE:ANR)
Alpha Natural Resources is primarily a coal miner. You might remember it as the firm that bought out the troubled West Virginia coal mining firm Massey Energy. Coal produces a lot of America’s electricity, even though that troubles some people. It’s not going away.
However, with the boom in natural gas, coal is taking a back seat, investment wise. ANR’s share price has dropped more than 50% over the last year and I think it’ll be a while before it can recover that value. There’s also no dividend and the EPS is negative. Only the riskiest money should go into ANR.
BHP Billiton Limited (ADR) (NYSE:BHP)
This is a large firm that most unsophisticated investors won’t know about. But they should. I’ve liked BHP for a while, now. The firm does mining in many different sectors, from coal and energy to precious metals and oil. It’s big enough to handle all of those different tasks and to supply the material to the world market.
The firm has had some strike issues with both miners and supervisors in the last few months, but it’s basically sound. I think the market as a whole is slightly bearish on BHP but I think it’s worth picking up, if only for solid growth – above 20% in the last six months – and a 2.88% dividend yield.