In this article, we discuss 10 cheap coal stocks to buy today. If you wish to skip our detailed analysis of the coal industry and the latest market situation, go directly to 5 Cheap Coal Stocks to Buy Today.
Coal has made a big comeback. According to BP’s Statistical Review of World Energy, demand for coal in 2021 surpassed 2019 levels by 6%. Two major coal producers, China and India, constituted 70% of this extra demand, as economies recovering from the pandemic and hotter-than-usual weather led to increased demand for energy. But only a few months ago, the black metal was on the verge of being phased out. Modern economies across the world, especially in Europe, had pledged to shut down all coal-powered plants. This process was well underway, with there being only 3 coal plants left in the United Kingdom, when Russia decided to attack Ukraine and put the global energy markets in a tailspin.
Europe imports 46% of its demand for coal, 40% of its natural gas and 27% of its oil from Russia. In retaliation for crippling sanctions, the Kremlin decided to play ball and halt the supply of natural gas to Germany through the Nord Stream 1 pipeline in June. Fearing an existential crisis during the upcoming winter months, Germany, Italy, Austria and the Netherlands subsequently announced plans to restart old coal plants. The European Union now expects to use 5% more coal than previously anticipated over the next 5 to 10 years.
The global energy crunch has resulted in Asia’s coal benchmark reaching its highest valuation yet. According to data by IHS Markit, spot physical coal prices at Australia’s Newcastle port reached an all-time high of $402.50 per ton on June 24, crossing the $400 barrier for the first time. Rystad Energy predicts that coal prices could exceed $500 per ton in 2022, on the back of sky-high natural gas prices that are forcing Europe to turn towards coal.
Overall, the energy sector has been on an extraordinary upward trajectory as of late. Some of the biggest beneficiaries include names such as Exxon Mobil Corporation (NYSE:XOM), BP plc (NYSE:BP), and Shell plc (NYSE:SHEL). But for investors looking to benefit from the rising prices and usage of coal, we’ve prepared a list of 10 cheap coal stocks to buy now.
Our Methodology
10 Cheap Coal Stocks to Buy Today
10. Natural Resource Partners L.P. (NYSE:NRP)
Number of Hedge Fund Holders: 2
Share Price (as of July 1): $37.53
First up we have Natural Resource Partners L.P. (NYSE:NRP), which deals in the ownership, operation and lease of mineral properties in the United States, developing coal, soda ash, and trona ore, among other minerals. The Texas-based company has coal reserves located mainly in the Appalachia, Illinois Basin, and the Northern Powder River Basin in the United States. As coal prices surge around the globe, Natural Resource Partners L.P. (NYSE:NRP) has seen its share price climb 83.52% in the last 12 months as of July 1.
In Q1 2022, Natural Resource Partners L.P. (NYSE:NRP) posted revenue of $74.9 million, up 113.22% from the year-ago quarter. Net income stood at $62.8 million, also showing extraordinary year-on-year growth of 650.13%. These red-hot figures were achieved due to the company’s strong execution and robust demand for met coal, thermal coal and soda ash.
On May 13, Natural Resource Partners L.P. (NYSE:NRP) declared a $0.75 per share quarterly dividend, which was a massive 66.7% increase from its prior dividend of $0.45. The company’s yield stands at 7.99% as of July 1.
At the end of March, 2 hedge funds from the database of Insider Monkey reported ownership stakes in Natural Resource Partners L.P. (NYSE:NRP) with a collective worth of $23.25 million. GoldenTree Asset Management was the largest shareholder of NRP with a stake worth more than $23 million.
In order to take advantage of soaring prices in the energy sector, stocks such as Exxon Mobil Corporation (NYSE:XOM), BP plc (NYSE:BP), and Shell plc (NYSE:SHEL), along with Natural Resource Partners L.P. (NYSE:NRP) are some of the best names to buy now.
9. American Resources Corporation (NASDAQ:AREC)
Number of Hedge Fund Holders: 4
Share Price (as of July 1): $1.51
American Resources Corporation (NASDAQ:AREC) deals in the mining, development and marketing of metallurgical coal to steelmaking industries in the United States and abroad. The company has coal mining sites in the states of West Virginia and Kentucky. It also has a rare earth materials subsidiary recently named reELEMENT Technologies LLC, which is developing a new technology in collaboration with several universities, to produce a concentrate as a byproduct of coal mining which can be used to extract rare earth metals. This segment has significant upside potential, given that these rare materials are used in the production of batteries and other critical technologies. American Resources Corporation (NASDAQ:AREC) also deals in the collection and transportation of iron and steel scrap across the United States.
In April, American Resources Corporation (NASDAQ:AREC) secured the exclusive worldwide rights for a new provisional patent filed by Purdue University, its technology and research partner, for the isolation and purification of battery-grade materials using multi-mode chromatography for all feedstocks. This technology can produce high-purity lithium, cobalt, manganese salts and nickel, all of which are precious minerals used worldwide.
4 hedge funds out of the 900+ tracked by Insider Monkey were long American Resources Corporation (NASDAQ:AREC) at the end of the first quarter, with aggregate stakes worth $2.14 million. This shows a positive trend from the previous quarter, when 2 hedge funds held $461,000 worth of positions in the company.
8. Alliance Resource Partners, L.P. (NASDAQ:ARLP)
Number of Hedge Fund Holders: 5
Share Price (as of July 1): $18.73
With a share price of $18.73 as of July 1, and an extraordinary 168.72% rally in the last 12 months, Alliance Resource Partners, L.P. (NASDAQ:ARLP) is one of the best cheap coal stocks to buy now. The Oklahoma-based company produces metallurgical and thermal coal for utilities and industrial users worldwide. It also has sizeable interests in oil and gas properties across the United States, and has recently been making forays into green energy projects as well. Alliance Resource Partners, L.P. (NASDAQ:ARLP) also provides mining technology products and services, such as industrial collision avoidance systems, mining proximity detection systems, and data and analytics software.
At the end of March, Alliance Resource Partners, L.P. (NASDAQ:ARLP) was given an ‘Outperform’ rating by Noble Capital analyst Mark Reichman, who initiated coverage of the stock with a $22 price target. The analyst noted that the company’s strong cash flow generation is expected to support continued growth in its oil and natural gas royalty business, along with diversification into green energy sources.
In May, Alliance Resource Partners, L.P. (NASDAQ:ARLP) announced that it was investing in EV charging firm Francis Energy, which operates a network of EV charging stations across Oklahoma. On April 26, Alliance declared a $0.35 per share quarterly dividend, a 40% hike from its prior dividend of $0.25. That hike brings its forward yield to 7.47% as of July 1.
Of the hedge funds tracked by Insider Monkey, 5 reported having ownership stakes in Alliance Resource Partners, L.P. (NASDAQ:ARLP) as of the end of March with a collective price tag of $94.5 million. The same number of hedge funds were bullish on ARLP shares a quarter earlier as well. With a $76.4 million position, Magnolia Capital Fund was the leading shareholder of Alliance Resource Partners, L.P. (NASDAQ:ARLP) in the first quarter of 2022.
7. Hallador Energy Company (NASDAQ:HNRG)
Number of Hedge Fund Holders: 8
Share Price (as of July 1): $5.81
Hallador Energy Company (NASDAQ:HNRG) shares have surged 121.76% in the first six months of 2022. The company produces and supplies steam coal to electric utilities in the state of Indiana. Through its subsidiary Sunrise Coal LLC, which is the second-largest coal producer in Indiana, the company produces more than 6 million tons of coal per year at its Oaktown complex. Hallador Energy Company (NASDAQ:HNRG) is also working on green energy projects, which includes a joint venture with Hoosier Energy Cooperative to replace the latter’s Merom coal generation station and sell it 200MW of clean energy generated from solar panels.
As of the end of the first quarter, 8 hedge funds were stakeholders in Hallador Energy Company (NASDAQ:HNRG), with combined holdings worth $8.35 million. That compares to 9 hedge funds in the previous quarter with $5.8 million worth of stakes in the company.
With a $3.27 million position, CastleKnight Management was the biggest shareholder of Hallador Energy Company (NASDAQ:HNRG) in the first quarter. Another prominent stakeholder was Jim Simons’ Renaissance Technologies, which held a $2.86 million stake in the coal company.
For the first quarter of 2022, Hallador Energy Company (NASDAQ:HNRG) disclosed revenue of $58.9 million, showing an increase of 26.15% in contrast to the year-ago quarter.
6. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 19
Share Price (as of July 1): $54.13
The largest mining company in the world with a $140 billion market cap, and significant exposure to coal operations around the globe, BHP Group (NYSE:BHP) is up next on our list of cheap coal stocks to buy. The company has operations in upwards of 90 regions internationally, and deals in the production of gold, copper, iron ore, and uranium, in addition to coal.
On June 7, Jefferies analyst Christopher LaFemina upgraded BHP Group (NYSE:BHP) to ‘Buy’ from ‘Hold’ with a price target of $82, up from $72. The analyst sees the mining sector as undervalued and poised to outperform as China undergoes a recovery after its Covid lockdowns. LaFemina subsequently raised his forecasts for iron ore and coal prices.
BHP Group (NYSE:BHP) has paid a dividend since 1989, and its yield stands at a whopping 12.93% as of July 1. It declared a $3.00 per share semi-annual dividend on February 23, which was payable to shareholders as of March 28. With a P/E (price to earnings) ratio of 8.13x, BHP Group (NYSE:BHP) also ranks as a great undervalued stock to buy now.
Billionaire Ken Fisher’s Fisher Asset Management boosted its stake in BHP Group (NYSE:BHP) by 117% in the first quarter of 2022, becoming the firm’s largest shareholder with 16.9 million shares valued at $1.3 billion. In total, 19 hedge funds were long BHP shares, holding $2.24 billion in combined positions. That was down from 25 hedge funds a quarter earlier.
Investment management firm Harding Loevner discussed the prospects of BHP Group (NYSE:BHP) in its first-quarter 2021 investor letter. Here is what was said:
“Our purchase of Australian mining company 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.”
Along with Exxon Mobil Corporation (NYSE:XOM), BP plc (NYSE:BP), and Shell plc (NYSE:SHEL), BHP Group (NYSE:BHP) is one of the best stocks to buy now within the energy sector.
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