By Oliver Ryan

(FORTUNE Magazine) – What we said

Just as America's furnaces were being switched on for winter last year, we pointed out the virtues of coal: Natural gas prices were up sharply, making America's coal- fired energy plants more competitive, and the industry was emerging from a round of margin-improving consolidation. Our pick was Consol Energy (CNX), trading at $35, which Friedman Billings Ramsey analyst David Khani said could climb 25% to 50%.

What happened

In a year of soaring energy prices, Consol shares beat even our optimistic assessment, nearly doubling, to $69. Natural gas was indeed the key driver. Soaring prices boosted Consol's natural gas business (which it spun off in August) and, more significant, helped push contract prices for the company's Appalachian coal up 22%. Now it looks like déjà vu all over again: Natural gas is still in short supply, and coal inventories at U.S. power plants are even lower than at this time last year. Despite higher operating costs resulting in part from--what else?--elevated oil and gasoline prices, coal industry revenues are increasing faster than expenses. Friedman's Khani is still bullish on the industry's fundamentals, and says he expects Consol to rise another 20% to 25% in the year ahead.