We came across a bullish thesis on Natural Resource Partners L.P. (NRP) on Twitter by InvestSpecial. In this article, we will summarize the bulls’ thesis on NRP. Natural Resource Partners L.P. (NRP)’s share was trading at $100.33 as of April 21st. NRP’s trailing P/E was 8.84 according to Yahoo Finance.
A view of industrial facilities illuminated by the night sky, hinting at the manufacturing capabilities of the coking coal company.
Natural Resource Partners (NRP) is emerging as an overlooked yet highly compelling special situation in the royalty business. With 80% of its cash flows derived from metallurgical coal royalties, NRP has spent the last decade on a disciplined deleveraging journey, shedding its legacy burdens from an aggressive, now-abandoned M&A strategy. Today, it trades at less than 4x normalized free cash flow—excluding its stake in the soda ash business—and is on the brink of becoming debt-free. Once its remaining debt is eliminated, likely within this year, the company is expected to initiate regular dividend payments, which could act as a powerful catalyst for a re-rating. Even with a conservative free cash flow estimate of $150 million—a level it rarely dipped below even in challenging pricing environments—the business offers roughly 60% upside when capitalized at a 10% yield, thanks to its stable, high-quality royalty streams.
Despite its strong fundamentals, NRP trades at depressed levels due to structural and market-driven factors. Its MLP structure deters a wide pool of institutional investors, and its coal-centric exposure makes it unpalatable for ESG-focused funds. Compounding this is the current softness in coal and soda ash pricing, largely stemming from weak Chinese demand. Yet NRP is not a typical commodity business. Its royalty model, supported by 13 million acres of mineral rights leased to world-class low-cost producers, offers contractual payment stability with minimal exposure to price and volume fluctuations. About 80–85% of its distributable cash flow stems from these mineral rights, making its income stream resilient and dependable.
The company’s turnaround story is further strengthened by insider alignment—management and board members own nearly 25% of the equity—and the recent elimination of overhangs like preferred equity and warrants. With a clean balance sheet, insider incentives, and a robust royalty base, NRP is poised to unlock significant shareholder value through dividends, buybacks, or both.
Natural Resource Partners L.P. (NRP) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held NRP at the end of the fourth quarter which was 5 in the previous quarter. While we acknowledge the risk and potential of NRP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NRP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.