Spotlight: Coal demand

He recommends taking advantage of pull-backs to snap up what he calls strong players like Arch Coal Inc. and Foundation Coal Holdings. He raised his rating on the two to "add" from "neutral." Howald raised his target on Peabody Energy Corp. to $88 from $66.

He predicts prices for coal, like other commodities, will climb through next year. The price of coal used in steel production is booming and steam coal, used in boilers to produce electricity, could gain even more as utilities renew annual contracts with customers. Demand could also rise if the summer is unusually warm, he says.

Friedman, Billings, Ramsey David Khani analyst also recently raised his coal price predictions and upgraded Massey Energy Co. to "outperform," from "market perform," saying coal demand will far outpace supply through 2010.