Has BTU Hit Rock Bottom Or Is There No Hope For Coal Stocks?

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Peabody Energy Corporation (NYSE:BTU) is under huge pressure after the announcement that the stock is being kicked out from the S&P 400 index without being listed in another index. The shares of the coalminer have declined 69.65% year-to-date and 85.67% in the past one year. Peabody Energy Corporation (NYSE:BTU) was introduced in the S&P 500 in November 2006 with a market cap of $10 billion. It was shifted to the S&P 400 index in September 2014 when its market cap was $3.9 billion. Today, the coal producer has a market cap of $657 million with its shares trading at $2.36 per share.

On a broader context, the entire coal industry is suffering because of higher production costs and lower coal prices in the past few years. Major institutional investors are under pressure to dissolve their investments in coal companies. A legislative committee in California voted in favor of the removal of the shares of leading miners from the state pension funds California including Calpers and CalSTRS.

Is Peabody Energy Corporation (NYSE:BTU) a bargain? Prominent investors are in a pessimistic mood. The number of long hedge fund bets shrunk by 10 recently. As many as 19 investment managers disclosed positions in Peabody Energy at the end of the first quarter of 2015 with net investments of $225.96 million. The energy company has witnessed reduction in number of investors as well as net investments, which stood at $239.86 million in the previous quarter.

Peabody Energy Corporation (NYSE:BTU)

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 144% over the last 32 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

While making a decision about investing in a particular stock, it helps to consider the insider activity and position of hedge funds in the company. Hedge funds spend a lot of money on research whereas insiders have a better understanding of the performance of the company. There hasn’t been any insider activity for Peabody Energy Corporation (NYSE:BTU) in the past six months.

S0, let’s take a look at the recent action regarding Peabody Energy Corporation (NYSE:BTU).

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