Friday, December 20, 2013

Seeking Alpha: Could Natural Resource Partners Be Seeing A Bottoming Out In Coal?

Investors in the coal sector have been waiting for a light at the end of the tunnel for some time now, but so far any new lights have just been another oncoming train. Natural Resource Partners (NRP) has held better than most though, as the company's strategy of operating as a royalty-collecting lessor helps mitigate some of the operating issues that miners like Arch Coal (ACI), Cloud Peak (CLD), and Alpha Natural Resources (ANR) have faced. It also has done the stock no harm to see management move in a similar direction to Penn Virginia Resource Partners (PVR) and prioritize diversification away from coal.

Even with diversification, coal royalties are still two-thirds of the revenue base and a key driver of the company's cash flow and distributions. With that, I do wonder if we have seen the worst of times in the U.S. thermal coal and global met coal markets. There are certainly stocks out there with more leverage to higher coal prices (Arch Coal and Cloud Peak certainly among them), but Natural Resource Partners' large distribution and apparent undervaluation do make this a name worth checking out today.

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Could Natural Resource Partners Be Seeing A Bottoming Out In Coal?

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