Coal is the number one source of energy generation in the world. In the United States alone, coal provides an average of 12.6 quadrillion BTUs of energy to the country each year, equal to about 39% of all energy used in the U.S.
Investors can capitalize on the expansive and worldwide use of coal by investing in a coal industry stock or set of stocks. We’ve summarized some of the best coal stocks currently available on the market, along with the risks and benefits of investing in coal, so you can make the most informed decision possible before you invest.
- Why invest in coal?
- Risks of investing in coal stocks
- The best coal stocks for 2019
- 1. Warrior Met Coal, Inc. (NYSE:HCC)
- 2. BHP Billiton, Ltd. (NYSE:BHP)
- 3. Rio Tinto Group (NYSE:RIO)
- 4. Natural Resource Partners, LP (NYSE:NRP)
- 5. Arch Coal, Inc. (NYSE:ARCH)
- 6. Cloud Peak Energy, Inc. (NYSE:CLD)
- Where you can buy coal stocks
- Final thoughts
Why invest in coal?
Coal may or may not be a great investment for you. Here’s why it might be a good fit for your portfolio.
Coal is abundant
There’s a reason why coal has been the power supply of choice for a century—the world has a ton of it. High concentrations of coal can be found in the United States, Russia, and China, all of which are nations that have implemented substantial infrastructure to extract the resource from the Earth. Investing in coal is a lot like investing in healthcare; you buy into an already-mature, thriving industry with less volatility than comparable markets.
Coal is a relatively inexpensive heating and energy source
Because the infrastructure needed to mine coal is already largely in place, coal offers a relatively inexpensive fuel source when compared to the cost of erecting new wind turbines and nuclear power plants. Many countries whose economies rely heavily on industrial production (like China and India) rely almost exclusively on coal as a source of energy because it is the most affordable option at their high rates of use.
New technology has lowered coal’s environmental impact
Though coal burning has been shown to have significant negative effects on the environment (more on that in the next section), improved technology has created “clean coal” that releases lower rates of carbon dioxide when burned. Coal can also be converted to a liquid or a gas, both of which burn cleaner than physical coal ore.
Risks of investing in coal stocks
Here are some red flags to consider before you invest in coal.
Serious health and environmental effects
Coal mining and coal burning have destructive effects on the environment, the health of miners and processors and even the temperature of the planet as a whole. Water supplies and wildlife local to coal mining plants are regularly decimated in the coal extraction process. Burning coal produces carbon dioxide as a byproduct, which has been shown to contribute to global warming. Even “clean” coal is not totally free of environmental and health effects. Though strides have been made to burn coal with fewer emissions, coal still remains one of the largest contributors of greenhouse gases in the world.
Government regulations limiting the use of coal as a fuel source
As more and more research papers are published detailing the negative environmental, social, and health effects that coal mining and burning have had on the planet, a number of countries have introduced industry legislation intended to limit each country’s use of coal as a source of fuel.
For example, the European Union and Australia have begun introducing loan guarantees and tax incentives to encourage entrepreneurs to invest in more eco-friendly alternatives to coal burning. President Trump has scrapped a number of Obama-era coal emissions regulations, but the number of emissions limitations and rules introduced outside of the United States still makes government intervention a large hazard and negative trend influencing the coal mining industry.
Coal is a nonrenewable resource
Did you know that it takes about 300 million years to form a lump of coal? Despite the fact that coal is currently abundant on our planet, it is still a nonrenewable resource—there’s a finite amount available and once it’s used up, it’s gone forever. This has led scientists around the world to devote money and brainpower to develop an alternative source of power to generate electricity. Even if society does not totally run out of coal, it is possible that an alternative source of energy will overtake coal in the near future should a clean and affordable development is reached.
The best coal stocks for 2019
Based on the criteria above, here are the best coal stocks for the year.
1. Warrior Met Coal, Inc. (NYSE:HCC)
Warrior Met Coal is a corporation focused on mining coal from the Appalachian region of the United States. The company owns its own processing facilities and makes most of its money exporting coal from the U.S. to buyers in Europe and South America. Warrior Met Coal is one of the U.S.’s largest coal mining operations, and the company estimates that it has the operational capacity to mine about eight million tons of coal a year from its 300 million ton reserves. Warrior Met Coal has also taken increased steps in recent years to protect both the occupational safety of its employees and the environment surrounding their mining operations.
According to data from Good Jobs First, the company has only been issued one citation for environmental safety violations in three years of operation. Warrior Met Coal doesn’t only deal in coal—it also sells natural gas, which is produced as a byproduct of the coal extraction process.
Offering an affordable stock on the New York Stock Exchange, an eye towards sustainability, and loads of potential, Warrior Met Coal, Inc. is a great option in the coal mining industry.
2. BHP Billiton, Ltd. (NYSE:BHP)
BHP Billiton is a jack of all trades in copper, iron ore, and petroleum extraction. BHP Billiton is based in Melbourne, Australia, but American investors shouldn’t be put off—the company offers a listing on the New York Stock Exchange under the ticker BHP. BHP maintains the largest concentration of its mines in the western Australian Outback, but the company also owns mining plants and petroleum processing plants in the United States, Trinidad and Tobago, Brazil, Algeria, Peru, and others.
In 2013, the company was listed alongside 89 other oil, gas, and coal producing corporations as contributing two-thirds of the greenhouse gases released into the atmosphere, according to research by the Climate Change Institute of the United States. Since then, BHP has voluntarily reported its emissions and co-founded the Bush Blitz, Australia’s largest nature documentation and recovery project.
3. Rio Tinto Group (NYSE:RIO)
The Rio Tinto Group is a multinational corporation and one of the world’s largest mining operations. Founded in 1873 with a single coal mining complex in Spain, the company has aggressively expanded across international borders and into the industries of aluminum, iron, copper ore, diamonds, and uranium.
Today, the company’s main offices are located in London and Melbourne—though Rio Tinto runs operations on six separate continents. In 2017, the Rio Tinto group produced a gross profit of over $40 billion, making it one of the most successful mining endeavors in human history. If you’re interested in investing in a company with a diverse portfolio of commodity offerings and an extensive history, investing in the Rio Tinto group may be the right option for you.
4. Natural Resource Partners, LP (NYSE:NRP)
Natural Resource Partners is a Texas-based natural resource extraction and processing company with operations across the United States. The company does not own any coal mines directly, but it leases out reserves and extraction equipment to mining companies in the form of long-term contracts. Natural Resource Partners does not just work with coal—the company also leases out construction equipment for residential and commercial building projects, provides construction aggregates, and is even the world’s fifth largest producer of soda ash, a material used in the production of glass, chemicals, soap, and paper.
Natural Resource Partners is a unique coal mining company because the majority of profits come not from direct coal mining but from patent royalties and other passive endeavors. If you’re looking to invest in a smaller coal operation that still offers a diverse range of offerings and business ventures beyond coal, Natural Resource Partners is an excellent place to start.
5. Arch Coal, Inc. (NYSE:ARCH)
Arch Coal is an American coal mining company that extracts, processes, and markets coal with low sulfur content to customers located largely within the domestic market of the United States. The company owns and operates mines in a number of western states, with major locations in Utah, Colorado, Wyoming, and Illinois.
Though the company’s mining and processing operations are all based in the United States, it exports product to customers located on five major continents. Low-sulfur coal is considered to be a key asset in the fight against acid rain, a type of acidic rainfall that causes damage to lakes and forestry surrounding coal burning factories and plants. If you’re interested in investing in the coal industry but you’re looking for a more environmentally responsible investment, Arch Coal offers an American investing option that’s profitable and sustainable.
6. Cloud Peak Energy, Inc. (NYSE:CLD)
A relatively new competitor in the coal mining sphere, Cloud Peak Energy owns and operates three open-pit coal mines in Wyoming and Montana. The company was originally formed as a spinoff venture of the Rio Tinto group to explore mining operations in the Powder River Basin of Wyoming.
Though the company’s current operations are small when compared to other listings, the stock is affordable. At the time of writing, a share of stock in Cloud Peak Energy was listed at $1.76. If you are looking for an investment option with a larger potential for growth, Cloud Peak Energy offers a great first choice.
Where you can buy coal stocks
If you feel like coal stocks are the right move, you can go ahead and purchase using your brokerage. Don’t have a brokerage? Check out some of Benzinga’s favorite online brokerages, from the Best Online Stock Trading Brokerages of 2019, below.
|Broker||Best For||Commissions||Account Minimum||Choose your platform|
||$4.95 volume discount available||$0||
Get started securely through Ally Investment's website
1 Minute Review
If investors are on the hunt for a bargain broker, Ally Invest could be the one. With low commissions across the board, Ally Invest (formerly TradeKing) stops potential investors in their tracks with its especially low mutual fund commissions. Commissions on stocks and ETFs are notoriously inexpensive as well, and for more active traders or those with larger account balances, commissions can dip as low as $3.95 per trade.
$3.95 per stock trade for Active Traders at Ally Invest
||$6.95 for fewer than 30 trades/quarter.||$0||
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1 Minute Review
E-Trade is best known for its user-friendly browser, desktop and mobile trading platforms and its extensive research and educational information. E-Trade may not have the lowest commissions compared to discount online brokers, but customers certainly get their money’s worth from E-Trade’s comprehensive offerings.
60 days of commission-free trades with deposit of $10,000 or more
Get started securely through TD Ameritrade's website
1 Minute Review
This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.
Trade commission–free for 90 days & get up to $2500
Coal may currently be the largest source of energy in the world, but this doesn’t mean that it will last forever. Investors who consider investing in coal can mitigate risk by diversifying their portfolio with socially responsible stocks that focus on lessening the environmental impact of the world’s energy needs.
No idea where to get started? Benzinga’s list of the Best Socially Responsible Mutual Funds is an excellent crash-course in conscious investing.