Hedge Funds’ Favorite Coal Stocks: Peabody Energy Corporation (BTU), Walter Energy, Inc. (WLT) & More

Arch Coal Inc (NYSE:ACI), meanwhile, is the next largest consensus hedge fund pick in this space, with 25 filers at the end of Q4. Unfortunately, the company has also been hurt by reduced demand for coal.  Arch Coal reported a net loss of $295 million, or $1.39 per diluted share, for Q4 of 2012, with an annual adjusted net loss for 2012 of $77 million, or $0.36 per share.  While the company’s share price is down around 24% YTD, the company did have its fair share of bulls heading into the beginning of the year; George Soros initiated a position, while Israel Englander of Millennium Management increased his stake by 279% in Q4 (see Englander’s full holdings here).

CONSOL Energy Inc. (NYSE:CNX), lastly, engages in the production of both coal and natural gas. The company reported that its Q4 2012 profit was down 23% based on the lower price of coal; it’s idling some its coal mining operations. On the flip side, Consol Energy’s stock has not been hurt as bad as the other companies discussed here; its share price is up slightly over 1% for the year, and it’s trading 23% above its 52-week low. Furthermore, hedge funds were increasing their overall investment in the company by about 3% last quarter. Steve Cohen of SAC Capital increased his position by nearly 50% over this same period.

Overall, coal companies are still facing strong macroeconomic headwinds.  The increased availability of cheap natural gas has significantly reduced coal demand, combined with increased coal inventory.  Despite these difficulties, we have noted that some well-known hedge fund managers are increasing their stakes in coal companies.  Investors may wish to keep an eye on natural gas prices.   If natural gas goes up, the demand for coal will likely increase, possibly sending the share prices of these companies higher. With results like these, it’s always important to consider the smart money’s sentiment.

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