In this article, we discuss 5 cheap coal stocks to buy today. If you wish to read our detailed analysis of the coal industry and the latest market situation, go directly to 10 Cheap Coal Stocks to Buy Today.
5. CONSOL Energy Inc. (NYSE:CEIX)
Number of Hedge Fund Holders: 22
Share Price (as of July 1): $48.12
Record-breaking coal prices mean good news for CONSOL Energy Inc. (NYSE:CEIX), which exports bituminous coal to industrial end-users and other customers across the world. The Pennsylvania-based company was founded in 1860 and owns the Pennsylvania Mining Complex (PAMC), which has several coal mines and possesses roughly 612 million tons of proven and probable coal reserves. The company also provides coal export terminal services. As of July 1, CONSOL Energy Inc. (NYSE:CEIX) has seen its share price surge 187.46% in the last 12 months, and 104.42% this year.
Hedge funds have been eager to buy CONSOL Energy Inc. (NYSE:CEIX) shares. At the end of Q1 2022, 22 hedge funds reported long bets on the company’s shares, up from 15 hedge funds in the preceding quarter. David Einhorn’s Greenlight Capital was the largest Q1 shareholder of CONSOL Energy Inc. (NYSE:CEIX), with a position valued at more than $55 million. CONSOL also featured as one of Greenlight Capital’s top performers during the first quarter.
On May 5, B. Riley analyst Lucas Pipes maintained a ‘Buy’ rating on CONSOL Energy Inc. (NYSE:CEIX) shares and raised the price target to $63 from $46, after the company exceeded Q1 expectations owing to improving margins and strong realizations. The analyst sees an expanding order book for CONSOL in 2023.
Greenlight Capital talked about CONSOL Energy Inc. (NYSE:CEIX) in its Q2 2021 investor letter. Here’s what it said:
“Thermal Coal and Natural Gas
ESG investing is inflationary, as green energy is simply more expensive than hydrocarbons. Hydrocarbon energy companies are starved for capital and are being told to change their ways. The result is less exploration and drilling. Even with benchmark oil prices surging over the last year, companies are loath to drill more. Normally, the cure for high prices is high prices. With ESG in the proverbial driver’s seat, we might need much higher prices still
in order to increase investment to meet demand.There is almost nothing less popular than thermal coal. From 2011 to 2020, U.S. coal production declined by 51%. U.S. demand has fallen as we’ve shifted to alternative sources of electricity. As unpopular as coal is though, it still makes up about 20% of U.S. electricity generation. Globally, coal demand is growing modestly as China and India add power generation capacity faster than the West is reducing it. Even so, reduced oil and gas drilling has caused natural gas prices to advance and coal prices are following. Seaborne thermal coal prices are up 140% year-over-year and at the highest levels since 2011, and Northern Appalachia thermal coal prices are catching up, rising 23% in the last month alone.
We own CONSOL Energy (CEIX), the lowest cost, most efficient miner in Appalachia, which is poised to benefit from rising coal prices. It trades at 12x consensus earnings estimates that look stale to us, as they do not reflect recent coal price gains.”
4. Ramaco Resources, Inc. (NASDAQ:METC)
Number of Hedge Fund Holders: 22
Share Price (as of July 1): $12.81
Ramaco Resources, Inc. (NASDAQ:METC) is next up on our list of cheap coal stocks to buy. Based in Kentucky, the firm is a provider of metallurgical coal to blast furnace steel mills, coke plants, and metallurgical coal consumers in the United States and internationally. The company’s portfolio includes the Berwind, Elk Creek, RAM Mine, and Knox Creek mines in the states of Virginia, West Virginia, and Pennsylvania.
Money managers have been decidedly bullish on Ramaco Resources, Inc. (NASDAQ:METC), which has posted gains of 126.73% in the last 12 months and looks set to continue its red-hot trajectory. 22 hedge funds held $38.7 million worth of positions in Ramaco Resources, Inc. (NASDAQ:METC) at the end of the first quarter, compared to 14 funds in the previous quarter with $13.2 million worth of stakes.
Israel Englander’s Millennium Management stood as Ramaco Resources, Inc.’s (NASDAQ:METC) biggest shareholder in the first quarter, with approximately 524,000 shares valued at $8.27 million. This was a massive 504% jump in stake over the previous quarter.
On June 7, Ramaco Resources, Inc. (NASDAQ:METC) was upgraded to ‘Buy’ from ‘Hold’ by Jefferies analyst Christopher LaFemina, who revised the price target to $25, up from $16. He upgraded his forecasts for iron ore and coal prices, noting that the mining sector is currently undervalued and well-positioned to post outperformance as energy demand picks up again in China.
Horos Asset Management had this to say about Ramaco Resources, Inc. (NASDAQ:METC) in its Q1 2022 investor letter:
“This quarter we sold our entire stakes in Ramaco Resources. The reason is purely due to their lower upside potential after a very strong performance. In the case of Ramaco Resources, as we mentioned in the previous quarterly letter, its high volatility allowed us to realize high returns on two different occasions (we exited the position and then re-entered it) in a short period of time, demonstrating the importance of rebalancing positions in our portfolio. Meanwhile, although with somewhat different dynamics, our investments in the metallurgical coal companies Ramaco Resources has strong returns and we sold them during the period.”
3. Peabody Energy Corporation (NYSE:BTU)
Number of Hedge Fund Holders: 27
Share Price (as of July 1): $21.04
Peabody Energy Corporation (NYSE:BTU) was founded in 1883, and currently ranks among the world’s top producers of coal. It provides metallurgical coal and thermal coal to steelmaking firms, power-generation utilities and other consumers in approximately 25 countries around the globe. Increasing coal prices mean Peabody shares continue to climb upwards; in the last 12 months they have gained 161.69%, to trade around $21.
Benchmark analyst Nathan Martin reiterated a ‘Buy’ rating on Peabody Energy Corporation (NYSE:BTU) shares in May and bumped the price target on them to $29 from $19. Strong coal demand will result in greater cash flow for Peabody, Martin noted, which will allow the firm to accelerate its goal of eliminating debt. Jefferies analyst Christopher LaFemina upgraded a number of mining firms in June on account of rising coal and iron ore prices, giving Peabody Energy Corporation (NYSE:BTU) a ‘Buy’ rating with a $36 price target.
A detailed examination of the 900+ hedge funds in the first-quarter database of Insider Monkey showed that 27 hedge funds were bullish on Peabody Energy Corporation (NYSE:BTU) shares, with the largest position being held by Elliott Management at $634 million in value. In contrast, 28 hedge funds were long BTU in the previous quarter.
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.”
1. Teck Resources Ltd (NYSE:TECK)
Number of Hedge Fund Holders: 56
Share Price (as of July 1): $29.78
With shares trading near $30 as of July 1, Teck Resources Ltd (NYSE:TECK) is one of the best, most affordable coal stocks to buy now. The Canadian mining company produces coal, copper, gold, silver, lead, and other metals, as well as chemicals and fertilizers, through operations in the United States, Canada, Turkey, Australia, Ireland, Mexico, Chile, and Peru.
Hedge fund sentiment around Teck Resources Ltd (NYSE:TECK) was overwhelmingly positive in Q1. At the end of the first quarter, 56 hedge funds owned $2.64 billion worth of positions in the company compared to 40 hedge funds a quarter earlier. Of the 56 bullish hedge funds, Soroban Capital Partners was the leading shareholder of Teck Resources Ltd (NYSE:TECK) with a $495 million stake.
On June 29, Deutsche Bank analyst Liam Fitzpatrick maintained a ‘Buy’ rating on Teck Resources Ltd (NYSE:TECK) shares, and revised the price target to $48 from $52. TECK is currently trading below its intrinsic market value, with a P/E ratio of 5.04x.
You can also take a look at 15 Best Semiconductor Stocks to Buy Now and 15 Largest Energy Companies.
