In this article, we discuss the 5 best coal stocks to invest in. If you wish to read our detailed analysis of the coal industry and the latest market situation, go directly to 10 Best Coal Stocks To Invest In.
5. Ramaco Resources, Inc. (NASDAQ:METC)
Number of Hedge Fund Holders: 22
Ramaco Resources, Inc. (NASDAQ:METC) is up next on our list of the best coal stocks to invest in. It deals in the mining, production and sale of metallurgical coal in the states of Virginia, West Virginia and Pennsylvania. The firm’s mineral property portfolio consists of the Elk Creek, Berwind, RAM Mine, and Knox Creek mines. It supplies coal to US-based blast furnace steel mills and coke plants, as well as metallurgical coal consumers around the globe. As of June 7, Ramaco Resources, Inc. (NASDAQ:METC) shares have climbed 194.18% in the last 12 months, making it one of the best-positioned firms in the coal industry.
Jefferies analyst Christopher LaFemina on June 7 upgraded Ramaco Resources, Inc. (NASDAQ:METC) to ‘Buy’ from ‘Hold’ with a price target of $25, up from $16. He thinks that the mining sector is currently undervalued and poised to outperform as China undergoes a recovery. LaFemina raised his coal price and iron ore forecasts, and upgraded a handful of firms in the group.
22 hedge funds owned stakes worth $38.7 million in Ramaco Resources, Inc. (NASDAQ:METC) at the end of the first quarter. This shows growing investor confidence in the company over the previous quarter where 14 hedge funds owned $13.2 million worth of positions. The biggest shareholder of Ramaco Resources, Inc. (NASDAQ:METC) in the first quarter was Millennium Management, which increased its stake by more than 500% to consist of roughly 524,000 shares worth $8.27 million.
Here is what Horos Asset Management had to say about the prospects of Ramaco Resources, Inc. (NASDAQ:METC) in its Q3 2021 investor letter:
“As mentioned above, we also initiated a position in Ramaco. The decision to invest in this U.S. metallurgical coal producer stems from our positive outlook for this commodity, given its supply and demand dynamics—which we have already explained in the past because of our Warrior investment. The company is in a phase of expansion of its production capacity, which could lead it to produce more than 4 million tons per year, compared to the current c. 2.5 million. It concentrates part of its production on customers in the United States, where its mines are located. Finally, unlike most listed coal mining companies, the Board and management team control more than 75% of the shares, so they are fully aligned with the rest of the shareholders. Although the upside is now much lower, following the rally that Ramaco had since investing at the beginning of the quarter, we believe that it is still attractive in the current market context.”
4. Peabody Energy Corporation (NYSE:BTU)
Number of Hedge Fund Holders: 27
Peabody Energy Corporation (NYSE:BTU) is one of the world’s largest producers of coal. It markets the black metal to more than 25 countries around the world, and its clients include major electric power generation and steelmaking companies. At the start of 2022, the company owned interests in 17 coal mining operations located across the United States and Australia.
On May 2, Benchmark analyst Nathan Martin raised the firm’s price target on Peabody Energy Corporation (NYSE:BTU) to $29 from $19 and maintained a ‘Buy’ rating on the company shares. Martin notes that the demand for coal remains strong, which would enable the company to generate a greater cash flow, allowing it to accelerate its goal of eliminating debt. In the last year, shares of Peabody Energy Corporation (NYSE:BTU) have gained a whopping 236.28% as of June 8.
The first quarter database of Insider Monkey showed that 27 hedge funds were bullish on Peabody Energy Corporation (NYSE:BTU) shares, as compared to 28 hedge funds a quarter earlier. With 25.85 million shares priced at $634.3 million, Elliott Management was the top shareholder of Peabody Energy Corporation (NYSE:BTU) in the first quarter of 2022.
3. Warrior Met Coal Inc. (NYSE:HCC)
Number of Hedge Fund Holders: 31
Warrior Met Coal Inc. (NYSE:HCC) ranks next on our list of the most exciting coal stocks to buy. The Alabama-based company mines, produces and sells non-thermal metallurgical coal to the steelmaking industry around the globe, including South America, Europe and Asia. It also markets natural gas, which is extracted as a byproduct of coal production. Warrior Met Coal Inc. (NYSE:HCC) has also enjoyed an impressive rally like other major coal stocks, having soared 116.40% in the last 12 months, and 58.80% so far in 2022 as of June 8.
Out of all the hedge funds tracked by Insider Monkey, 31 reported ownership of positions in Warrior Met Coal Inc. (NYSE:HCC) with an aggregate value of $353.9 million. The same number of hedge funds were stakeholders in the coal firm a quarter ago as well.
For Q1 2022, Warrior Met Coal Inc.’s (NYSE:HCC) revenue stood at $378.65 million, up 77.14% from year-ago figures but missing estimates by $34 million. EPS also came in below estimates by $0.79.
On June 7, Jefferies analyst Christopher LaFemina upgraded Warrior Met Coal Inc. (NYSE:HCC) to ‘Buy’ from ‘Hold’, with a revised price target of $50, up from $36. While the larger macro setup is risky and mining shares “should be volatile,” the analyst sees the sector as undervalued and well-positioned to outperform as demand in China amps up again.
Despite the recent outperformance, investment firm Horos Asset Management had this to say about Warrior Met Coal Inc. (NYSE:HCC) in its Q3 2021 investor letter:
“In addition, we trimmed our stake in the U.S. company Warrior Met Coal (“Warrior”), following its excellent recent performance. The metallurgical coal producer, which is necessary to produce steel in blast furnaces, benefited during the quarter from the sharp rise in the price of this commodity. Specifically, the price of Warrior’s metallurgical coal, referenced to Australia’s Premium Low-Vol FOB Hard Coking Coal, rose by 100% in the quarter and is up 300% from the lows of the beginning of the year, when it was trading at around 100 dollars per tonne. The reason for the huge price increase can be found in the bottleneck that this industry is experiencing, due to a few factors. On the one hand, the recovery of economic activity after the worst of the pandemic ended and the extra boost given by the huge fiscal and monetary stimuli from governments globally and, on the other hand, the lack of investment in new supply in recent years due to the hangover from previous overcapacity, the poor situation of some players in the industry and, especially, the political and social agenda against climate change.
This rise in the price of metallurgical coal has seen Warrior’s share price appreciate by more than 70% from last summer’s lows, contributing significantly to our fund’s performance. However, the downside of the story is that Warrior has had the bulk of its employees on strike since April, which means that the company is not producing at one of its two mines and the other is not at 100% capacity, so it is not benefiting from the current positive dynamics like other players in the industry.”
2. Arch Resources, Inc. (NYSE:ARCH)
Number of Hedge Fund Holders: 45
Arch Resources, Inc. (NYSE:ARCH) shares have gained 194.27% in the last 12 months as of June 8. The Missouri-based company deals in the mining and production of thermal and metallurgical coal across the United States, and exports it to steelmakers, utility and industrial users across Europe, Africa and Asia.
On April 27, B. Riley analyst Lucas Pipes raised the firm’s price target on Arch Resources, Inc. (NYSE:ARCH) to $234 from $231 and kept a ‘Buy’ rating on the company shares. The analyst holds that the company is well-positioned to make new records in its cash generation, given that it executed positively on strong met coal pricing despite ongoing rail-service headwinds.
45 hedge funds were stakeholders in Arch Resources, Inc. (NYSE:ARCH) at the end of the first quarter. This shows a positive trend from the preceding quarter where 40 hedge funds were long on the company shares.
In Q1 2022, Arch Resources, Inc. (NYSE:ARCH) posted an EPS of $13.02, exceeding analysts’ estimates by $1.34. Revenue of $867.94 million for the quarter also outperformed estimates by $142.6 million, and represented growth of 142.8% in comparison to the year-ago quarter.
Investment firm Nordstern Capital examined the market position and future prospects of Arch Resources, Inc. (NYSE:ARCH) in its Q1 2022 investor letter. It said:
“Arch Resources (NYSE:ARCH) is a low-cost high-quality metallurgical (met) coal producer for the global steel industry. Coal might be among the most hated products in the world, due to its reputation for being a dirty climate killer. However, steelmaking requires coal, solar panels and wind turbines require steel. Our modern society relies on steel and modernizing countries such as China,
India, Indonesia therefore rely on coal.Coal is an essential commodity, yet the industry was ‘left for dead’ by Wall Street, ESG-driven investment flows, politics, the public, and everyone else. This will probably continue to pose a wide moat for potential new entrants. Years of constrained supply and underinvestment now meet with global supply-chain issues, increased demand post-lockdowns, and inflationary pressures. In addition, the sanctions against Russia are crippling one of the big six producers, China is shifting away from Australia and Germany’s governing Green Party suddenly considers more coal. Demand up, supply down → price: moon.
Value investing veteran Bob Robotti argues in “revenge of the old economy” that US producers of physical goods are benefitting from sustained inflation. Inflation driven energy costs in China and Europe increase much faster than in the US. Hence, US energy-intensive industries such as steelmaking are at a relative advantage. A healthy US steel industry will bode well for US met coal producers such as Arch Resources…” (Click here to see the full text)
1. Teck Resources Ltd (NYSE:TECK)
Number of Hedge Fund Holders: 56
Teck Resources Ltd (NYSE:TECK) is a Canadian diversified mining company which deals in the production and worldwide supply of steelmaking coal, gold, copper, lead and silver, as well as chemicals, fertilizers, and other metals. With inflation and a supply bottleneck driving the prices of all these natural resources high, Teck Resources Ltd (NYSE:TECK) stands to benefit as one of the biggest mining firms in the world. As of June 8, it has gained 93.16% in the last 12 months, and 57.13% so far in the year.
Reporting its Q1 earnings on April 27, Teck Resources Ltd (NYSE:TECK) disclosed earnings per share of $2.31, beating estimates by $0.06. Revenue of $3.93 billion for the quarter also exceeded analysts’ predictions by $16.1 million, and represented year-on-year growth of 89.76%. On April 28, B. Riley analyst Lucas Pipes gave Teck Resources Ltd (NYSE:TECK) an unchanged rating of ‘Buy’ and raised the price target to C$58 from C$57, after the firm beat Q1 expectations.
With a $495 million stake, Soroban Capital Partners was the largest shareholder of Teck Resources Ltd (NYSE:TECK) in the first quarter of 2022. Overall, investors were seen piling into Teck Resources Ltd (NYSE:TECK) at the end of the first quarter, where 56 hedge funds owned positions in the company with a combined value of $2.64 billion. This is in contrast to 40 hedge funds a quarter earlier with $1.62 billion worth of stakes in the mining firm.
You can also take a look at 15 Fastest Growing Industries In the World and 12 Best Mining Stocks to Buy Now.
