A Natural Resource Partners Insider Likes Coal and Dividends

Other coal companies- though these are producers- include Cloud Peak Energy Inc. (NYSE:CLD), CONSOL Energy Inc. (NYSE:CNX), Peabody Energy Corporation (NYSE:BTU), and Arch Coal Inc (NYSE:ACI). Most of these stocks are down at least 10% in the last year; Arch Coal has fallen by nearly 50%. 2013 earnings multiples also tend to be quite high: Arch Coal is expected to be unprofitable this year, while the current-year P/Es for CONSOL and Peabody are close to 30. None of these stocks pay a yield of more than 2% and so they aren’t competitive with Natural Resource Partners on an income basis either. Cloud Peak, which is primarily a thermal coal provider, stands out as the general exception; its stock price down only slightly, its valuation at 12 times 2013 earnings estimates, revenue and earnings actually improving. Value investors who want to get into coal- and think the other companies in the industry are too dependent on a recovery in earnings- might consider it alongside Natural Resource Partners.

While hedge funds have been generally cool on Natural Resource Partners, they have been buying some of these peers and an investor could take that as an optimistic sign for the industry (since coal, at least within each segment, is more or less a commodity business). We’d note that billionaire George Soros was buying Peabody in the third quarter of 2012 (see more of Soros’s stock picks) and fellow billionaire T. Boone Pickens, normally an oil and gas investor, initiated small positions in both Arch Coal and CONSOL (find more stocks Pickens likes).

Disclosure: I own no shares in any stocks mentioned in this article.