2. Warrior Met Coal, Inc. (NYSE:HCC)
Third Avenue Management’s Stake Value: $49.457 million
Number of hedge fund holders: 31
Warrior Met Coal, Inc. (NYSE:HCC) is a steel industry supplier, with two underground mines located in Alabama. Blackrock (NYSE:BLK) is the biggest holder of Warrior Met Coal, Inc. (NYSE:HCC), followed by Vanguard Group Inc. Warrior Met Coal, Inc. (NYSE:HCC) has been a part of controversy in its recent past as more than a year ago, 1,100 members of the United Mine Workers of America went on strike against the company due to a lack of agreement on labor contract. The strike still continues.
Meanwhile, Warrior Met Coal, Inc. (NYSE:HCC) has been enticed by higher coal prices to not just restart development of a mine but also to pay a special dividend to its shareholders which has led to prices increasing and the stock is up 32.77% in the year. It has fully repaid the trust of being one of the top stock picks of Martin Whitman’s Third Avenue Management, and makes up 6.73 of the company’s total portfolio.
Horos Asset Management, which is an investment management firm, published its Q3 2021 invest letter. Here is what is said:
“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.”
