Alliance Resource Partners, L.P. (ARLP): Still The Best In Its Industry

Page 1 of 2

One thing I’ve learned in over 20 years of investing is people are stubborn. Certain industries are written off for dead, and many good stocks go unnoticed because of this. Other investors stop paying attention when they realize the author owns the shares. However, I’m begging you to stick with me on this one. I’m here to tell you about Alliance Resource Partners, L.P. (NASDAQ:ARLP).

Record Results And A High Yield
My investment thesis here is really simple. Alliance pays a current yield of 6.94%. What’s equally as important is, the company raises this distribution each quarter, and has been doing so for several years. The stock sells for about 10 times projected earnings, and they have contracted more sales for 2013 than they had for 2012. The company is no flash in the pan either, considering they just reported the “12th consecutive year of record financial results.”

Alliance Resource Partners, L.P.So what’s the problem? To be honest, Alliance operates as a coal partnership. For those of you who are still reading, this is a coal company the likes of which I haven’t found an equal. If you look at their financials and projected growth, it’s hard for me to make an argument to buy another stock in this industry.

What Makes This Company Different?
Since yield is the most obvious attraction to the stock, let’s look at some other options. Investors could buy Peabody Energy Corporation (NYSE:BTU) or Arch Coal Inc (NYSE:ACI), and get yields of 1.36% and 1.7% respectively. Both companies are pure plays on the coal industry, but given the choice between a near 7% yield and less than 2%, this is a no contest. An even larger player in the natural resources field is BHP Billiton Limited (ADR) (NYSE:BHP), but even this mega-cap’s yield of 2.87% doesn’t come close to Alliance.

Another way to compare Alliance to their peers is by looking at their operating margin. A company with a higher margin either has pricing power, is a more efficient operator, or both. In either case, a company with a higher margin should be more protected from challenges in the future. Alliance reported an operating margin of 19.42%, which increased from last year’s margin of 18.39%. By comparison, Peabody’s operating margin was 13.16% last quarter, and Arch Coal’s margin came in at 12.5%. Though BHP does have a higher margin at 32.54%, this is because of the company’s diverse operations that span into precious metals and other industries besides coal.

If investors need a third reason that Alliance is different from its competition, look at what analysts are calling for in revenue growth over the next few years. In theory, solid revenue growth makes bottom line growth easier to achieve. In the next two years, analysts expect average revenue growth of 8.3% at Alliance. Considering that Peabody and BHP are expected to report about 5.5% revenue growth, and Arch Coal is expected to see negative revenue growth, you can see why Alliance may do better than its competition.

One of The Few Companies That Can Predict Its Sales For Multiple Years
Nothing is more reassuring than a company predicting sales for multiple years. Most of Alliance’s sales are contracted ahead of time, so this is more than just the company trying to make investors feel good. This last quarter, the company reported revenue up 15.8% and coal sales volumes up 19.8%.

Page 1 of 2

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!