In this article, we discuss the 10 best coal mining stocks to buy.
The global coal mining industry has long been a vital component of the energy sector, playing a significant role in powering industries and households around the world. However, in recent years, the industry has faced numerous challenges and undergone significant transformations due to shifting global trends and concerns regarding climate change and environmental sustainability. One of the key global trends impacting the coal mining industry is the increasing focus on reducing carbon emissions and transitioning towards cleaner energy sources. Many countries and international organizations have set ambitious climate goals, aiming to reduce their reliance on fossil fuels and achieve carbon neutrality. As a result, there has been a growing shift towards renewable energy alternatives such as solar, wind, and hydroelectric power, which offer cleaner and more sustainable options for electricity generation.
Despite the higher capital cost, supercritical coal plants, an emerging trend, have an environmental advantage as they emit around 20% less carbon dioxide compared to subcritical plants. As a result, the implementation of high-efficiency low emission (HELE) technologies, supported by policy interventions and technological advancements, is expected to decrease the use of subcritical plants to approximately 50% by 2025. Ongoing research is focused on developing ultra-supercritical units that can operate at even higher efficiencies, potentially reaching up to 50%. Several countries, including Denmark, Germany, and Japan, have already introduced ultra-supercritical technology to improve plant efficiencies and reduce fuel costs. Overall, the adoption of improved electricity generation technologies in the coal mining industry, such as supercritical and ultra-supercritical plants, as well as IGCC and FBC, offers opportunities to enhance efficiencies, reduce emissions, and ensure the continued utilization of coal as an energy source.
Market Trends
The global coal market experienced modest growth from $614.96 billion in 2022 to $621.89 billion in 2023, with a compound annual growth rate (CAGR) of 1.1%. However, the ongoing Russia-Ukraine war has impeded the global economic recovery following the COVID-19 pandemic, particularly in the short term. This conflict has resulted in economic sanctions on multiple countries, a surge in commodity prices, disruptions in supply chains, and overall inflation across various sectors worldwide. Despite these challenges, the coal market is projected to continue growing, reaching an estimated value of $658.68 billion by 2027, with a CAGR of 1.4%. This growth is expected to be driven by factors such as the increasing demand for electricity and steel production in emerging economies, infrastructure development projects, and the sustained use of coal as an energy source in certain regions. However, it is important to note that the coal market’s growth may still face uncertainties due to evolving environmental concerns, government policies, and the global transition towards cleaner energy sources.
The growth of the coal mining market in the coming years is supported by the utilization of liquid coal as a fuel source for electricity and transportation. This presents an opportunity for coal to meet the increasing energy demands of the transportation sector. Through various processes, coal can be converted into gases and liquids that can be used as fuels or transformed into chemicals for other purposes, often referred to as synthetic fuels. The use of liquid coal as an alternative to conventional oil products, which are experiencing significant price increases, is particularly attractive. By implementing carbon capture and storage (CCS) technology, all coal plants can provide carbon-neutral electricity for electric personal vehicles. PHEVs charged with electricity from advanced supercritical coal power plants emit 33% less greenhouse gas emissions compared to conventional vehicles. Furthermore, if these advanced supercritical coal power plants incorporate CCS, the emissions can be reduced by 66%. Rising gas prices, which have benefited energy giants like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), are another reason for the bullish near-term outlook for coal.
Challenges to Coal Industry
The coal mining market is expected to face significant challenges in the years ahead due to uncertainties in both demand and pricing. The demand for coal is influenced by various uncontrollable factors, including global economic conditions, which affect consumption patterns. Additionally, the demand for electricity and steel, the cost of alternative fuels, the expenses associated with generating electricity from renewable sources like wind, solar, hydro, and nuclear power, as well as taxes and environmental regulations imposed by governments, all contribute to the fluctuating demand and price of coal.
In the power generation sector, the demand and price of thermal coal are impacted by factors such as the availability of coal supply, the balance between supply and demand, transportation costs, the availability and cost of alternative non-coal power sources, and regulatory limitations on coal usage. For metallurgical coal, which is used in steel production, its demand and price are influenced by the overall demand for steel and the competition from alternative technologies that don’t rely on coal as a raw material.
All of these factors have a negative impact on the global coal mining market. The unpredictable nature of demand and pricing makes it challenging for coal mining companies to make informed decisions and plan for the future. They must navigate the complex interplay of global economic factors, technological advancements, environmental concerns, and government regulations to sustain their operations and profitability in an ever-changing market landscape.
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Our Methodology
For this article, we selected mining stocks that have interests in the coal business based on overall hedge fund sentiment. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm.
Best Coal Mining Stocks to Buy
10. NACCO Industries, Inc. (NYSE:NC)
Number of Hedge Fund Holders: 5
NACCO Industries, Inc. (NYSE:NC) engages in the natural resources business. The firm is one of the most reliable dividend players in the coal industry. In the last four decades, it has consistently paid a dividend to shareholders. These payments have grown since the last nine years consecutively. In early May, the firm declared a dividend of $0.2075 per share, in line with previous. The forward yield was 2.61%.
In the first quarter of 2023, NACCO Industries, Inc. (NYSE:NC) posted earnings per share of $0.76 and a revenue of more than $50 million. The firm is based in Ohio and operates surface coal mines under long-term contracts for power generation companies.
At the end of the first quarter of 2023, 5 hedge funds in the database of Insider Monkey held stakes worth $11 million in NACCO Industries, Inc. (NYSE:NC), the same as in the preceding quarter worth $14 million.
Among the hedge funds being tracked by Insider Monkey, Tulsa-based investment firm Prescott Group Capital Management is a leading shareholder in NACCO Industries, Inc. (NYSE:NC) with 102,885 shares worth more than $3.7 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), NACCO Industries, Inc. (NYSE:NC) is one of the best energy stocks to buy.
9. Natural Resource Partners L.P. (NYSE:NRP)
Number of Hedge Fund Holders: 6
Natural Resource Partners L.P. (NYSE:NRP) owns and manages a portfolio of mineral properties. On May 4, the company posted earnings for the first quarter of 2023, reporting earnings per share of $3.44. The revenue over the period was close to $100 million, up around 10.9% compared to the revenue over the same period last year. The coal reserves of the firm are primarily located in the Appalachian Basin, the Illinois Basin, and the Northern Powder River Basin in the United States.
Natural Resource Partners L.P. (NYSE:NRP) is steadily building a dividend profile. In early May, the firm declared a quarterly dividend of $0.75 per share, in line with previous. The forward yield was an impressive 6.1%.
At the end of the first quarter of 2023, 6 hedge funds in the database of Insider Monkey held stakes worth $30 million in Natural Resource Partners L.P. (NYSE:NRP), compared to 5 in the preceding quarter worth $32 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm GoldenTree Asset Management is a leading shareholder in Natural Resource Partners L.P. (NYSE:NRP) with 541,561 shares worth more than $28 million.
8. Ramaco Resources, Inc. (NASDAQ:METC)
Number of Hedge Fund Holders: 12
Ramaco Resources, Inc. (NASDAQ:METC) produces and sells metallurgical coal. In early May, the company said it had discovered significant deposits of magnetic rare earth elements (REEs) at its Brook Mine in the Powder River Basin. The exploration efforts identified high-grade mineralization of REEs, including neodymium and praseodymium, which are crucial components for renewable energy technologies and high-tech applications.
In late March, investment advisory BMO Capital announced that analyst Katja Jancic had taken over coverage of Ramaco Resources, Inc. (NASDAQ:METC) stock with a Market Perform rating and a price target of $11.
At the end of the first quarter of 2023, 12 hedge funds in the database of Insider Monkey held stakes worth $18 million in Ramaco Resources, Inc. (NASDAQ:METC), the same as in the previous quarter worth $23 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Encompass Capital Advisors is a leading shareholder in Ramaco Resources, Inc. (NASDAQ:METC) with 515,484 shares worth more than $4.5 million.
In its Q1 2022 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Ramaco Resources, Inc. (NASDAQ:METC) was one of them. Here is what the fund said:
“This quarter we sold our entire stakes in Ramaco Resources, Inc. (NASDAQ:METC). The reason is purely due to their lower upside potential after a very strong performance. In the case of Ramaco Resources, Inc. (NASDAQ:METC), 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.”
7. Hallador Energy Company (NASDAQ:HNRG)
Number of Hedge Fund Holders: 12
Hallador Energy Company (NASDAQ:HNRG) engages in the production of steam coal. The company owns and runs the Oaktown Mine 1 and Oaktown Mine 2 underground mines. These are located in Indiana. On May 9, the firm posted earnings for the first quarter of 2023, reporting earnings per share of $0.67, beating estimates by $0.51. The revenue over the period was $188 million, up over 200% year-on-year.
Hallador Energy Company (NASDAQ:HNRG) is based in Indiana and is also involved in the natural gas business. It recently reported profitability of $22.1 million and operating cash flow of $26.1 million on the continued strength of shipments of higher priced coal contracts and a full quarter of operations at the Merom Generating Station.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm CastleKnight Management is a leading shareholder in Hallador Energy Company (NASDAQ:HNRG) with 274,159 shares worth more than $2.5 million.
At the end of the first quarter of 2023, 12 hedge funds in the database of Insider Monkey held stakes worth $18 million in Hallador Energy Company (NASDAQ:HNRG), compared to 13 in the previous quarter worth $24 million.
6. Warrior Met Coal, Inc. (NYSE:HCC)
Number of Hedge Fund Holders: 24
Warrior Met Coal, Inc. (NYSE:HCC) produces and exports non-thermal metallurgical coal primarily for the steel industry. On May 3, the firm posted earnings for the first quarter of 2023, reporting earnings per share of $3.57. The revenue over the period was $509 million, up more than 34% compared to the revenue over the same period last year. The firm also revealed that sales volume in the first quarter of 2023 was 1.9 million short tons compared to 1.1 million short tons in the first quarter of 2022.
In mid-March, investment advisory BMO Capital took over coverage of Warrior Met Coal, Inc. (NYSE:HCC) stock with an unchanged rating of Market Perform and a price target of $39.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Third Avenue Management is a leading shareholder in Warrior Met Coal, Inc. (NYSE:HCC) with 1.3 million shares worth more than $49 million.
At the end of the first quarter of 2023, 24 hedge funds in the database of Insider Monkey held stakes worth $225 million in Warrior Met Coal, Inc. (NYSE:HCC), compared to 25 in the previous quarter worth $249 million.
Along with Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Warrior Met Coal, Inc. (NYSE:HCC) is one of the elite energy stocks to buy.
In its Q1 2022 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Warrior Met Coal, Inc. (NYSE:HCC) was one of them. Here is what the fund said:
“Among others, we can highlight that at Horos Value Internacional we exited our position in the metallurgical coal producer Warrior Met Coal, Inc. (NYSE:HCC), following the strong performance of its stock. Meanwhile, although with somewhat different dynamics, our investment in the metallurgical coal company Warrior Met Coal also had strong returns and we sold it during the period. The reason is purely due to its lower upside potential after a very strong performance.”
5. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 24
BHP Group (NYSE:BHP) is an Australian natural resources firm with interests in petroleum, copper, iron, and coal. Recent reports indicate that JSW, an Indian conglomerate, is reportedly considering the acquisition of coal mines in Australia owned by BHP Group. The potential deal, valued at around $1.5 to $2 billion, would allow JSW to secure a long-term coal supply for its steel mills. JSW’s interest in the Australian coal mines comes as part of its efforts to diversify its coal sourcing and reduce dependence on imports. The discussions between JSW and BHP Group are still at an early stage, per these reports.
On April 28, investment advisory JPMorgan maintained a Neutral rating on BHP Group (NYSE:BHP) stock and lowered the price target to 2,320 GBP from 2,370 GBP. Analyst Lyndon Fagan issued the ratings update.
At the end of the first quarter of 2023, 24 hedge funds in the database of Insider Monkey held stakes worth $122 million in BHP Group (NYSE:BHP), compared to 28 in the preceding quarter worth $1.4 billion.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in BHP Group (NYSE:BHP) with 863,916 shares worth more than $54 million.
In its Q1 2022 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and BHP Group Ltd. (NYSE:BHP) was one of them. Here is what the fund said:
“Our purchase of Australian mining company BHP Group Ltd. (NYSE:BHP) is an example of a quality company at a moderate valuation that should deliver attractive long-term returns. We believe the market has undervalued its enduring competitive advantage due to its low cost iron and copper mining operations which has allowed the company to deliver consistent profits and cash flows across the inevitable ups and downs of the global metals cycle. While the variability of commodity prices prevents BHP from scoring in the top ranks of measured quality, we are willing to bear some of that uncertainty in return for a more attractive valuation given the company’s strong business fundamentals.”
4. CONSOL Energy Inc. (NYSE:CEIX)
Number of Hedge Fund Holders: 33
CONSOL Energy Inc. (NYSE:CEIX) is a Pennsylvania-based energy company founded in 1864. The company primarily produces and exports bituminous coal. The firm owns and runs the Pennsylvania Mining Complex which comprises the Bailey Mine, the Enlow Fork Mine, the Harvey Mine, and the Central Preparation Plant. It has over 657 million tons of proven and probable coal reserves at the complex. Consol Energy posted a 9.4% increase in coal production during the first quarter, focusing on exports due to weakened domestic markets caused by low natural gas prices.
The Pennsylvania Mining Complex, which ran all five longwalls, produced 7.0 million tons of coal, compared to 6.4 million tons in the previous year. The average cash cost of coal sold at the complex rose to $33.61 per ton, attributed to inflationary pressures on supplies, maintenance costs, and contractor labor.
At the end of the first quarter of 2023, 33 hedge funds in the database of Insider Monkey held stakes worth $284 million in CONSOL Energy Inc. (NYSE: CEIX), compared to 32 in the previous quarter worth $298 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Greenlight Capital is a leading shareholder in CONSOL Energy Inc. (NYSE:CEIX) with 2.7 million shares worth more than $158 million.
3. Peabody Energy Corporation (NYSE:BTU)
Number of Hedge Fund Holders: 39
Peabody Energy Corporation (NYSE:BTU) is a Missouri-based coal mining firm. It has interests in 17 coal mining operations. These are based in the United States and Australia primarily. The operations have 2.5 billion tons of proven and probable coal reserves and almost 450,000 acres of surface property.The firm recently announced that it had temporarily closed the Shoal Creek Mine in Alabama due to a fire incident. The exact reopening date has not been determined yet. This mine is the only source of metallurgical coal production for export within the US. The underground mine produced approximately 800,000 tons of coal last year, accounting for around 10% of Peabody Energy’s total metallurgical coal exports.
On May 1, B. Riley analyst Lucas Pipes maintained a Buy rating on Peabody Energy Corporation (NYSE:BTU) stock and lowered the price target to $29 from $39, noting the updated target reflects a lower thermal coal price deck.
At the end of the first quarter of 2023, 39 hedge funds in the database of Insider Monkey held stakes worth $955 million in Peabody Energy Corporation (NYSE:BTU), compared to 40 in the preceding quarter worth $1 billion.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Elliott Management is a leading shareholder in Peabody Energy Corporation (NYSE:BTU) with 21 million shares worth more than $540 million.
2. Arch Resources, Inc. (NYSE:ARCH)
Number of Hedge Fund Holders: 42
Arch Resources, Inc. (NYSE:ARCH) produces and sells coal. In late April, the company posted earnings for the first quarter of 2023, reporting earnings per share of $10.02, beating market estimates by $0.02. The revenue over the period was $869 million, beating estimates by more than $100 million.
On April 28, B. Riley analyst Lucas Pipes maintained a Buy rating on Arch Resources, Inc. (NYSE:ARCH) stock and lowered the price target to $198 from $200, noting that the highly competitive cost structure of the firm was a key feature of the investment case.
At the end of the first quarter of 2023, 42 hedge funds in the database of Insider Monkey held stakes worth $479 million in Arch Resources, Inc. (NYSE:ARCH), up from 34 in the previous quarter worth $717 million.
1. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Holders: 66
Teck Resources Limited (NYSE:TECK) is a diversified metals and mining firm. Recent reports indicate that Eric Sprott, a Canadian mining investor, has made an offer to invest in the coal unit of Teck. The investor is proposing to invest in coal operations that have been facing challenges due to the transition away from coal and increased environmental concerns. Sprott aims to capitalize on potential opportunities in the coal market and believes that there is still value in the industry.
In late April, B. Riley analyst Lucas Pipes maintained a Buy rating on Teck Resources Limited (NYSE:TECK) stock and raised the price target to C$68 from C$66, noting that the path of least resistance is for Teck shares to trade higher.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Soroban Capital Partners is a leading shareholder in Teck Resources Limited (NYSE:TECK) with 11 million shares worth more than $404 million.
At the end of the first quarter of 2023, 66 hedge funds in the database of Insider Monkey held stakes worth $2 billion in Teck Resources Limited (NYSE:TECK), compared to 62 in the preceding quarter worth $2.5 billion.
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Disclose. None. 10 Best Coal Mining Stocks to Buy is originally published on Insider Monkey.
