My dad has a rule: stay as far away as possible from stocks with political exposure.

Peabody Energy Corp (NYSE: BTU), founded in 1883 and headquartered in St Louis, will be the second coal company covered by this Inverness here.

Possibly no industry is more politically out of favor. The recent golden children have been renewables and nuclear. Gas has always been the crowd favorite, at least in the US. And the 2022 Inflation Reduction Act accelerated the US shift from coal by incentivizing renewables and limiting coal production.

And I get it. Elon is hustling to put solar energy on every home, electric cars in every garage, and otherwise accelerate the movement away from dirty forms of energy. The industry seems to be even more out of favor since Trump won his third election race. The Range Global Coal ETF is down from $25/share at the November 2024 elections to $18.43 as of the time of publication here, a drop of over 25% in under 4 months. And BTU itself is outpacing the industry, from a high of $30 on November 6, 2024, to a current price of $14.64, over a 50% decline.

But…

For starters, BTU’s higher-than-average decline could indicate that it is oversold – a beautiful word for value investment. Additionally, the company announced in November 2024 that it would be acquiring Anglo American’s Australian steelmaking coal assets for up to $3.8 billion. This could triple BTU’s production by 2026. The purchase of the four mines should close mid-2025. BTU is engaging in this acquisition to meet Asian steel demand, while Anglo American is attempting to save a bit of face following failed takeover attempts by BHP.

The firm has operations in the Central United States and Eastern Australia. Due to their foreign nature, the Australian assets are likely underappreciated by US investors. Not to mention, China does not care one iota about the US’s conscientiousness regarding green energy, and so will keep buying BTU’s product. Xi Jinping might as well be a member of the Trammps. And so Mr Trump’s “All of the Above” energy policy is necessary to compete with China’s Human Torch.

The Once and Future US President Donald Trump has consistently touted coal as one of his main drivers for his revival of American industry. Along with US Energy Secretary, Chris Wright, Mr Trump has stated he is ending the “War on Coal.” He signed executive orders in 2017 to that end and the pair declared so again at the onset of this new administration.

And the company’s fundamentals. Oh my. Gorgeous. Pre-acquisition price to book of 0.53x. Price to Free Cash Flow of 2.12x. 2% dividend. Current ratio in excess of 2x, and a quick ratio (cash to current liabilities) in excess of 1.6x. It is a very well-capitalized company, with a debt to equity ratio of 0.12x (pre-acquisition). The company generates over $4 billion in sales per year with a profit margin of 8-9% compared to a market cap of almost $2 billion.

As mentioned above, we have recommended coal on this site before (and those of you who held your noses and took the plunge on NC since then have been enjoying a 20%+ gain and a >2% annual dividend!).

Can lightning strike twice?