Why Patriot Coal's Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of coal miner Patriot Coal (NYS: PCX) have fallen 10% today after a competitor announced another plant closure.

So what:Alpha Natural Resources (NYS: ANR) said it would close four mines that had become uneconomical. Falling coal prices and coal usage have caused companies to start closing plants that aren't cost-competitive, just as Patriot Coal did earlier this year.

Now what: You might think that less supply in the industry would be good for everyone, but what this really does is show just how dire the conditions are in coal. The low cost of natural gas has caused power generators to switch to natural gas, and more stringent regulations have caused older plants to close.

Don't say we didn't warn you. I wrote that it was time to abandon coal stocks in April and again in May, and I certainly wouldn't be buying in today.

Interested in more info on Patriot Coal? Add it to your watchlist by clicking here.

At the time thisarticle was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.