Nordstern Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. In its 2022 first-quarter letter, the fund emphasized that valuation is important, that prices will climb and shortages will worsen until inflation beneficiaries are rewarded by profits high enough to attract additional investment. Additionally, the fund mentioned that any ideal investment is priced cheaply in relation to the present value of its future cash flows, and the future cash flows should be benefitting from inflation and should be antifragile in a recession. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Nordstern Capital mentioned Arch Resources, Inc. (NYSE:ARCH) and explained its insights for the company. Founded in 1969, Arch Resources, Inc. (NYSE:ARCH) is a St. Louis, Missouri-based coal mining and processing company with a $2.6 billion market capitalization. Arch Resources, Inc. (NYSE:ARCH) delivered a 85.38% return since the beginning of the year, while its 12-month returns are up by 210.68%. The stock closed at $169.29 per share on May 25, 2022.
Here is what Nordstern Capital has to say about Arch Resources, Inc. (NYSE:ARCH) in its Q1 2022 investor letter:
“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)
Photo by Ricardo Gomez Angel on Unsplash
Our calculations show that Arch Resources, Inc. (NYSE:ARCH) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Arch Resources, Inc. (NYSE:ARCH) was in 45 hedge fund portfolios at the end of the first quarter of 2022, compared to 40 funds in the previous quarter. Arch Resources, Inc. (NYSE:ARCH) delivered a 43.49% return in the past 3 months.
In March 2022, we published an article that includes Arch Resources, Inc. (NYSE:ARCH) in 10 Undervalued Energy Stocks to Buy According to Hedge Funds. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
