Daily Wealth email Soros and coalHot item this week. IR left a call this afternoon. May have a chat with them tomorrow.
Billionaire investor George Soros, Citadel Investment Group LLC and T. Rowe Price Group Inc. are snapping up coal mining shares, taking advantage of the cheapest valuations in five years as demand for electricity rises.
Soros bought 2.9 million Arch Coal Inc. shares last quarter for a 2 percent stake in the second-largest U.S. coal producer, filings with the Securities and Exchange Commission show.
While coal, the cheapest fuel for power, is up 88 percent in Pennsylvania, shares of the companies that mine the mineral have slumped along with the rest of the commodities industry. Now, investors are betting that Peabody, which traded at 3.7 times projected 2009 earnings as of Nov. 21, and Arch at 2.5 times are cheap because coal use will increase. The valuations were at more than a 54 percent discount to the MSCI World/Energy Index.
"Coal is the best commodity to get into right now," said Daniel Rice, manager of BlackRock Advisors Inc.'s $1.5 billion Global Resources Fund in Boston, which is among the largest holders of Peabody and Arch. "It's a lot less sensitive to downturns because it's needed for basic power generation, and demand is growing."
Crude oil in New York has dropped 45 percent this year compared with a 6.1 percent decline in Australian coal prices.