5 Cheap Coal Stocks to Buy Today

2. Warrior Met Coal Inc. (NYSE:HCC)

Number of Hedge Fund Holders: 31

Share Price (as of July 1): $29.70

Warrior Met Coal Inc. (NYSE:HCC) deals in the production, mining and marketing of non-thermal metallurgical coal to steelmaking firms in the United States and all major regions around the globe. The company owns and operates two underground mines in Alabama, and also sells natural gas which has been derived as a byproduct of the coal-mining process.

With a 4.81x P/E (price to earnings) ratio, Warrior Met Coal Inc. (NYSE:HCC) looks significantly undervalued. Its shares have gained 80.22% in the last 12 months, and given the global surge in coal prices, there’s still more room for growth. Warrior Met Coal Inc. (NYSE:HCC) was upgraded to ‘Buy’ from ‘Hold’ by Jefferies analyst Christopher LaFemina in June, with an increased price target of $50, up from $36.

31 hedge funds reported bullish bets on Warrior Met Coal Inc. (NYSE:HCC) shares as of the end of March, holding combined stakes worth nearly $354 million. The same number of hedge funds were stakeholders in the company at the end of December as well.

Investment firm Horos Asset Management discussed the prospects of Warrior Met Coal Inc. (NYSE:HCC) in its Q3 2021 investor letter, stating:

“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.”