In this article, we discuss 10 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.
5. CONSOL Energy Inc. (NYSE:CEIX)
Number of Hedge Fund Holders: 22
Share Price (as of July 1): $48.12
Record-breaking coal prices mean good news for CONSOL Energy Inc. (NYSE:CEIX), which exports bituminous coal to industrial end-users and other customers across the world. The Pennsylvania-based company was founded in 1860 and owns the Pennsylvania Mining Complex (PAMC), which has several coal mines and possesses roughly 612 million tons of proven and probable coal reserves. The company also provides coal export terminal services. As of July 1, CONSOL Energy Inc. (NYSE:CEIX) has seen its share price surge 187.46% in the last 12 months, and 104.42% this year.
Hedge funds have been eager to buy CONSOL Energy Inc. (NYSE:CEIX) shares. At the end of Q1 2022, 22 hedge funds reported long bets on the company’s shares, up from 15 hedge funds in the preceding quarter. David Einhorn’s Greenlight Capital was the largest Q1 shareholder of CONSOL Energy Inc. (NYSE:CEIX), with a position valued at more than $55 million. CONSOL also featured as one of Greenlight Capital’s top performers during the first quarter.
On May 5, B. Riley analyst Lucas Pipes maintained a ‘Buy’ rating on CONSOL Energy Inc. (NYSE:CEIX) shares and raised the price target to $63 from $46, after the company exceeded Q1 expectations owing to improving margins and strong realizations. The analyst sees an expanding order book for CONSOL in 2023.
Greenlight Capital talked about CONSOL Energy Inc. (NYSE:CEIX) in its Q2 2021 investor letter. Here’s what it said:
“Thermal Coal and Natural Gas
ESG investing is inflationary, as green energy is simply more expensive than hydrocarbons. Hydrocarbon energy companies are starved for capital and are being told to change their ways. The result is less exploration and drilling. Even with benchmark oil prices surging over the last year, companies are loath to drill more. Normally, the cure for high prices is high prices. With ESG in the proverbial driver’s seat, we might need much higher prices still
in order to increase investment to meet demand.There is almost nothing less popular than thermal coal. From 2011 to 2020, U.S. coal production declined by 51%. U.S. demand has fallen as we’ve shifted to alternative sources of electricity. As unpopular as coal is though, it still makes up about 20% of U.S. electricity generation. Globally, coal demand is growing modestly as China and India add power generation capacity faster than the West is reducing it. Even so, reduced oil and gas drilling has caused natural gas prices to advance and coal prices are following. Seaborne thermal coal prices are up 140% year-over-year and at the highest levels since 2011, and Northern Appalachia thermal coal prices are catching up, rising 23% in the last month alone.
We own CONSOL Energy (CEIX), the lowest cost, most efficient miner in Appalachia, which is poised to benefit from rising coal prices. It trades at 12x consensus earnings estimates that look stale to us, as they do not reflect recent coal price gains.”
4. Ramaco Resources, Inc. (NASDAQ:METC)
Number of Hedge Fund Holders: 22
Share Price (as of July 1): $12.81
Ramaco Resources, Inc. (NASDAQ:METC) is next up on our list of cheap coal stocks to buy. Based in Kentucky, the firm is a provider of metallurgical coal to blast furnace steel mills, coke plants, and metallurgical coal consumers in the United States and internationally. The company’s portfolio includes the Berwind, Elk Creek, RAM Mine, and Knox Creek mines in the states of Virginia, West Virginia, and Pennsylvania.
Money managers have been decidedly bullish on Ramaco Resources, Inc. (NASDAQ:METC), which has posted gains of 126.73% in the last 12 months and looks set to continue its red-hot trajectory. 22 hedge funds held $38.7 million worth of positions in Ramaco Resources, Inc. (NASDAQ:METC) at the end of the first quarter, compared to 14 funds in the previous quarter with $13.2 million worth of stakes.
Israel Englander’s Millennium Management stood as Ramaco Resources, Inc.’s (NASDAQ:METC) biggest shareholder in the first quarter, with approximately 524,000 shares valued at $8.27 million. This was a massive 504% jump in stake over the previous quarter.
On June 7, Ramaco Resources, Inc. (NASDAQ:METC) was upgraded to ‘Buy’ from ‘Hold’ by Jefferies analyst Christopher LaFemina, who revised the price target to $25, up from $16. He upgraded his forecasts for iron ore and coal prices, noting that the mining sector is currently undervalued and well-positioned to post outperformance as energy demand picks up again in China.
Horos Asset Management had this to say about Ramaco Resources, Inc. (NASDAQ:METC) in its Q1 2022 investor letter:
“This quarter we sold our entire stakes in Ramaco Resources. The reason is purely due to their lower upside potential after a very strong performance. In the case of Ramaco Resources, 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.”
3. Peabody Energy Corporation (NYSE:BTU)
Number of Hedge Fund Holders: 27
Share Price (as of July 1): $21.04
Peabody Energy Corporation (NYSE:BTU) was founded in 1883, and currently ranks among the world’s top producers of coal. It provides metallurgical coal and thermal coal to steelmaking firms, power-generation utilities and other consumers in approximately 25 countries around the globe. Increasing coal prices mean Peabody shares continue to climb upwards; in the last 12 months they have gained 161.69%, to trade around $21.
Benchmark analyst Nathan Martin reiterated a ‘Buy’ rating on Peabody Energy Corporation (NYSE:BTU) shares in May and bumped the price target on them to $29 from $19. Strong coal demand will result in greater cash flow for Peabody, Martin noted, which will allow the firm to accelerate its goal of eliminating debt. Jefferies analyst Christopher LaFemina upgraded a number of mining firms in June on account of rising coal and iron ore prices, giving Peabody Energy Corporation (NYSE:BTU) a ‘Buy’ rating with a $36 price target.
A detailed examination of the 900+ hedge funds in the first-quarter database of Insider Monkey showed that 27 hedge funds were bullish on Peabody Energy Corporation (NYSE:BTU) shares, with the largest position being held by Elliott Management at $634 million in value. In contrast, 28 hedge funds were long BTU in the previous quarter.
2. Warrior Met Coal Inc. (NYSE:HCC)
Number of Hedge Fund Holders: 31
Share Price (as of July 1): $29.70
Warrior Met Coal Inc. (NYSE:HCC) deals in the production, mining and marketing of non-thermal metallurgical coal to steelmaking firms in the United States and all major regions around the globe. The company owns and operates two underground mines in Alabama, and also sells natural gas which has been derived as a byproduct of the coal-mining process.
With a 4.81x P/E (price to earnings) ratio, Warrior Met Coal Inc. (NYSE:HCC) looks significantly undervalued. Its shares have gained 80.22% in the last 12 months, and given the global surge in coal prices, there’s still more room for growth. Warrior Met Coal Inc. (NYSE:HCC) was upgraded to ‘Buy’ from ‘Hold’ by Jefferies analyst Christopher LaFemina in June, with an increased price target of $50, up from $36.
31 hedge funds reported bullish bets on Warrior Met Coal Inc. (NYSE:HCC) shares as of the end of March, holding combined stakes worth nearly $354 million. The same number of hedge funds were stakeholders in the company at the end of December as well.
Investment firm Horos Asset Management discussed the prospects of Warrior Met Coal Inc. (NYSE:HCC) in its Q3 2021 investor letter, stating:
“In addition, we trimmed our stake in the U.S. company Warrior Met Coal (“Warrior”), following its excellent recent performance. The metallurgical coal producer, which is necessary to produce steel in blast furnaces, benefited during the quarter from the sharp rise in the price of this commodity. Specifically, the price of Warrior’s metallurgical coal, referenced to Australia’s Premium Low-Vol FOB Hard Coking Coal, rose by 100% in the quarter and is up 300% from the lows of the beginning of the year, when it was trading at around 100 dollars per tonne. The reason for the huge price increase can be found in the bottleneck that this industry is experiencing, due to a few factors. On the one hand, the recovery of economic activity after the worst of the pandemic ended and the extra boost given by the huge fiscal and monetary stimuli from governments globally and, on the other hand, the lack of investment in new supply in recent years due to the hangover from previous overcapacity, the poor situation of some players in the industry and, especially, the political and social agenda against climate change.
This rise in the price of metallurgical coal has seen Warrior’s share price appreciate by more than 70% from last summer’s lows, contributing significantly to our fund’s performance. However, the downside of the story is that Warrior has had the bulk of its employees on strike since April, which means that the company is not producing at one of its two mines and the other is not at 100% capacity, so it is not benefiting from the current positive dynamics like other players in the industry.”
1. Teck Resources Ltd (NYSE:TECK)
Number of Hedge Fund Holders: 56
Share Price (as of July 1): $29.78
With shares trading near $30 as of July 1, Teck Resources Ltd (NYSE:TECK) is one of the best, most affordable coal stocks to buy now. The Canadian mining company produces coal, copper, gold, silver, lead, and other metals, as well as chemicals and fertilizers, through operations in the United States, Canada, Turkey, Australia, Ireland, Mexico, Chile, and Peru.
Hedge fund sentiment around Teck Resources Ltd (NYSE:TECK) was overwhelmingly positive in Q1. At the end of the first quarter, 56 hedge funds owned $2.64 billion worth of positions in the company compared to 40 hedge funds a quarter earlier. Of the 56 bullish hedge funds, Soroban Capital Partners was the leading shareholder of Teck Resources Ltd (NYSE:TECK) with a $495 million stake.
On June 29, Deutsche Bank analyst Liam Fitzpatrick maintained a ‘Buy’ rating on Teck Resources Ltd (NYSE:TECK) shares, and revised the price target to $48 from $52. TECK is currently trading below its intrinsic market value, with a P/E ratio of 5.04x.
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