Billionaire George Soros Is Betting On Coal Stocks

The coal sector is clearly in a depression, which has been caused by a variety of reasons, mainly the federal government's warning on all things coal. Since President Obama took office, increasing regulations have hurt coal production and has forced ulitities to cut back on coal and use other sources of energy. Last month President Obama announced his Clean Energy Plan, which resulted in the already depressed coal sector to become even more depressed. In addition, coal has been unable to complete against lower cost energy sources like natural gas, and now oil, which is selling at around $50 a barrel due to OPEC and the shale boom.

All of this has lead the coal sector to fall into a depression with multiple coal companies now selling for less than a $1. After the President announced his clean energy plan which will destroy the coal sector, George Soros revealed in his 13f filing that he purchased shares of two coal companies.

Mr. Soros purchased share of Peabody Energy and Arch Coal, two of the largest publicly traded companies in the United States. During the second quarter Soros purchased over a 1,000,000 shares of Peabody for $2.4 million, and purchased 550,000 share of Arch Coal for $188,00. Soros acquired his stakes in both companies at bargain prices.

Peabody Energy (BTU):

Peabody is doing everything possible to survive the depression in the coal sectors. The company is reducing its operating and its annual expenses. By doing this, Peabody will see a pick up in its cash flow in 2017. Peabody's reductions have saved $685 million for the next two years and will improve its margins going forward. The company, like others in its industry, has been reporting losses for the last few years and isn't cash flow positive. Unlike some of its competitors, Peabody won't go bankrupt. The company has a tangible book value of $10.04 and sells for 0.17x tangible book value. Peabody has total assets of $13 billion and $298 million in cash which makes up around half of the company's market cap.

Arch Coal (ACI):

Arch Coal is trying to get creditors on board with its structuring plan. The plan is Arch Coals way of preventing a file bankruptcy. They have extended the original offer from August 14th to September 26th at midnight. Management is trying to swap $2.2 billion in borrowing which will include $400 million in new debt which will include $400 million. The company is using a private offer to exchange Trust certificates maturing in 2021 at a coupon rate of 6.25% with cash in exchange for any and all of its senior notes maturing in 2020 that yield 7.25%. The company has reported net losses and negative cash flow for the last few years. Currently, Arch Coal is selling for $0.29 and has a tangible book value of $7.86. The company is selling for 0.04x its tangible book value and has a debt to equity ratio of 3.09. Arch Coal has $930 million in cash and marketable securities on its balance sheet. The company has total assets of $8 billion and total liabilities of $6 billion with assets exceeding liabilites by over 1.3x.

Billionaire Financer George Soros is making a bet on the coal sectors. His investments in Arch Coal and Peabody Energy was a little shocking after he disclosed his positions. Mr. Soros has been a big backer of President Obama and a supporter of green energy policies of the White House. If you have the stomach to stand the volatile in the coal sector then invest along side Mr. Soros.

Published on Sep 5, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2020. Content published with author's permission.

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