In this article, we will examine the 10 Best Coal Stocks based on the number of hedge funds holding them.
Research by The Business Research Company estimates the coal market to grow by 2.6% in 2025, reaching a market value of $669.84 billion. The continued dependency on coal for developing countries should sustain a growth rate of 2% until 2029. The APAC region is the region with the largest share of the market with China being the largest player. Slow economic growth in the region is the reason for the lackluster performance of the commodity in 2024.
Rising energy demand is the primary driver for the growth in the coal industry but a transition to renewable forms of energy forms a major headwind. The steel industry along with other manufacturing sectors provides a sustained demand for coal. These industries have not fared well in 2024, leading to unfavorable pricing for coal companies.
The production in the US is expected to remain flat in 2025 after registering a 12% drop in 2024. The demand from utility firms is expected to be met by the accumulation of inventory. India continues to be the destination where a majority of the exports of metallurgical and thermal coal take place. While the trend is expected to continue, a strengthening dollar is expected to lower the volumes in the near future.
The recent performance of coal companies has not been particularly good due to the overall macroeconomic environment. Companies are looking to diversify their assets and are exploring opportunities in other commodities like mining. Nonetheless, most of these companies have a healthy balance sheet that has enabled them to tide over this period. With a better year around the corner, there should be a revival in business for these companies.
Coal ETFs have generated returns of -4.34%, -17.86% and -20.86% for 1-month, 6-month and 1-year tenors. While big tech players pose a threat, there is immense potential to tap a constantly growing advertising pie that would benefit traditional players.
READ ALSO 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In
For this article we picked 10 coal stocks trending on latest news. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A coal-loading terminal with trucks lined up to be loaded.
10. Ramaco Resources Inc. (NASDAQ:METC)
Number of Hedge Fund Investors: 16
Ramaco Resources Inc. (NASDAQ:METC) engages in the development, operation and sale of metallurgical coal. It offers a dividend yield of more than 5%, along with a high institutional and insider holding.
The guidance for 2025 is positive as METC expects annual production volume between 4.4-4.8 million tons. If the midpoint is taken as a reference, it reflects a 15% impressive growth from its 2024 level. The benefits from an increase in sales are expected to be offset by higher costs due to inflationary pressure but this does not prevent the bottom line from growing. The key drivers of growth for METC will be the Elk Creek and Berwind complexes. 66% of its sales for 2025 has already been booked with 1.6 million tons committed by North American customers and 1.3 million tons from export orders. METC trades at 14.72x its trailing EPS and considering the high dividend yield, the company seems to have an attractive valuation.
9. Hallador Energy Company (NASDAQ:HNRG)
Number of Hedge Fund Investors: 21
Hallador Energy Company (NASDAQ:HNRG) engages in the production of steam coal in the State of Indiana for the electric power generation industry. It is another stock in the list with high institutional holdings and is benefitting from the booming rise in data centers. In a recent deal, it bagged a $5 million cumulative order with a leading data center developer.
In spite of a challenging business environment, it managed to improve its gross margin from $8.11 per megawatt hour in the previous quarter to $16.36 in Q3-24. It has also executed a $60 million prepaid power purchase agreement that has the potential to turn into a long-term deal. Operating cash flows turned negative on account of restructuring of its Sunrise coal division but HNRG continues to reduce its debt level. The firm is looking to focus on its power segment, with coal offering a supportive role in the overall business.
8. BHP Group Limited (NYSE:BHP)
Number of Hedge Fund Investors: 22
BHP Group Limited (NYSE:BHP) operates as a resources company with coal being one of the key segments. The primary operations of BHP are located in Australia, Europe, China, Japan, India, South Korea, the rest of Asia and North America.
While the overall business has been growing, energy coal production was down 4% y-o-y and steelmaking coal was lower by 23% in the latest quarter. This does not deter the annual guidance as the company expects coal production to be in the upper half of its guidance for 2025. The impact of unfavorable coal prices has been offset by higher shipments. A diversified business makes BHP a defensive investment in the commodity space. A more favorable coal pricing should enable BHP to generate better margins. It has already received a higher EBITDA revision for the year. A forward dividend yield close to 6% also offers a lucrative investment opportunity in this stock.
7. SunCoke Energy Inc. (NYSE:SXC)
Number of Hedge Fund Investors: 24
SunCoke Energy Inc. (NYSE:SXC) is an independent producer of metallurgical and thermal coal in the Americas and Brazil. It also operates coke-making facilities in the United States and Brazil. SXC has entered into a 3-year agreement to manage coal assets at Kanawha River Terminal In another development, it managed to bag a deal with US Steel to supply coke through June 2025.
The third quarter performance has been terrific with net income jumping four folds y-o-y from $8.5 million to $33.3 million in Q3-24. The full-year EBITDA guidance has been revised upward from $240-255 million to $260-70 million primarily due to an improved performance in its Logistics business. Operating cash flows continue to grow with SXC offering a generous dividend opportunity. The stock currently trades close to 10x its trailing 12-month EPS. Given the potential growth, the valuation appears to be attractive at its current price level.
6. Peabody Energy Corporation (NYSE:BTU)
Number of Hedge Fund Investors: 25
Peabody Energy Corporation (NYSE:BTU) operates as a coal mining business in the United States, Australia, Europe and Asia. It is involved in the mining, preparation, and sale of thermal coal primarily to electric utilities, industrial facilities and steel manufacturers.
With a P/E of 4.8, it is certainly an undervalued stock for a company looking to expand its coal assets globally. In a recent development, BTU made its first shipment from Centurion Mine in Queensland’s Bowen Basin. The newly acquired mine has an expected life of 25 years and offers premium hard coking coal used in making original steel. BTU has also agreed to acquire four Tier 1 steel mines from Anglo American that would enable it to venture into metallurgical coal. Even with coal pricing being unfavorable BTU beat revenue estimates in Q3 with a positive earnings surprise of 26.50%.
5. Consol Energy Inc. (NYSE:CEIX)
Number of Hedge Fund Investors: 31
Consol Energy Inc. (NYSE:CEIX) just completed a merger with Arch to create Core Natural Resources. CEIX produces and sells bituminous coal to power generators, industrial end-users and metallurgical end-users in the United States and internationally.
Prior to the merger, the company delivered a robust Q3-24, registering a 2% y-o-y revenue growth. Coal production increased from 6.1 million tons to 7.2 million tons despite the planned maintenance shutdown at Pennsylvania Mining Complex. A higher volume of coal sales reduced the cash cost per ton from $38.36 to $35.85. The cost is well below the fiscal guidance of $37.50-$38.50, providing scope for further improvement in its bottom line. A significant achievement for CEIX is the zero employee incidents for the third quarter. The merger with Arch should enable CEIX to compete in metallurgical and thermal coal markets on a global scale.
4. Alpha Metallurgical Resources Inc (NYSE:AMR)
Number of Hedge Fund Investors: 32
Alpha Metallurgical Resources Inc (NYSE:AMR) is a mining company that produces, processes and sells met and thermal coal in Virginia and West Virginia. The company offers metallurgical coal products. The share has been experiencing a downtrend in the last few months but is available at a trailing 12-month EPS multiple of 6.93.
The latest result has disappointed with Net Income down 96% y-o-y even though the revenue was in line with analyst expectations. The global headwinds that include slow growth in China have been the driving force for low growth, coal pricing could turn favorable soon as global demand picks up. AMR has historically delivered high returns to its shareholders and has maintained a robust cash flow. The buyback has also been stalled due to unfavorable business conditions. One should expect the returns to improve further once the buyback commences. The capital position of the leading producer of metallurgical coal is also strong and would enable AMR to proceed with its capex plans for 2025.
3. Warrior Met Coal Inc. (NYSE:HCC)
Number of Hedge Fund Investors: 32
Warrior Met Coal Inc. (NYSE:HCC) produces and exports non-thermal steelmaking metallurgical coal for steel production by metal manufacturers in Europe, South America, and Asia. It operates underground mines in Alabama and also sells natural gas that is obtained as a by-product from coal production.
While slow growth in China has been a cause of concern for HCC, it has a diversified client base across India and other emerging countries. It is another undervalued script in this list, with a trailing P/E of 7.41. The stock has been under pressure since the drop in EPS from $1.64 in Q3-23 to 0.80 in Q3-24. The performance, however, exceeded estimates with revenue and earnings higher by 1.2% and 12%, respectively. The 23% drop in quarterly sales can be considered an aberration with revenue projected to grow at 1.5% for the next three years. While this is lower than the overall industrial rate of 5.3%, favorable pricing of coal should restore profitability to a much higher level.
2. Arch Resources Inc. (NYSE:ARCH)
Number of Hedge Fund Investors: 37
Arch Resources Inc. (NYSE:ARCH) engages in the production and sale of metallurgical products. It operates in two segments, Metallurgical and Thermal. The company operates active mines. It is owned or controlled primarily through long-term leases of coal land in the US. ARCH was merged with Consol Energy to form Core Natural Resources.
The third quarter result has been disappointing with an EPS of -$0.34 against an estimate of $2.51. ARCH’s sales were impacted by a three-week outage of the shiploader in Baltimore, reducing coal shipments by 200,000 tons in the quarter. On a brighter note, the thermal segment turned positive due to cost-cutting measures in the Powder River Basin operations. ARCH should generate better margins as its legacy contracts in the West Elk mine have expired in 2024. A better output from the Leer mine is also expected in 2025 due to a more favorable geographical position. The merger with Consol should offer better logistic capabilities and synergies worth $110-140 million.
1. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Investors: 68
Teck Resources Limited (NYSE:TECK) operates through Steelmaking Coal, Copper, Zinc, and Energy segments with principal products that include principal products include copper, zinc, steelmaking coal, and blended bitumen. It sold its steelmaking coal business, EVR in 2024 to focus on copper, zinc and other metals business. The sale of its coal business has allowed TECK to buy back shares and pay back debt worth $2.75 billion.
EPS for Q3 was $0.44, down from $0.57 a year ago but provided a positive surprise of 22%. The guidance for the next quarter is positive with copper production higher by 50% due to higher throughput. Analysts at Raymond James and JP Morgan have revised their EPS estimates downwards but continue to have a favorable outlook on TECK with “Outperform” and “Overweight” ratings. The decision to offload the coal business may hurt the total earnings but it allows TECK to focus on the metals business which is set to have a better growth rate than the coal industry.
While we acknowledge the potential of TECK as an investment, our conviction lies in the belief that 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 TECK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
