Arch Resources: 2x Free Cash Flow, Arguably The Best Coal Investment

Jun. 29, 2022 5:08 AM ETArch Resources, Inc. (ARCH) StockARCH72 Comments

Summary

  • Coal prices are going to stay high for a while. The dynamics between coal demand and natural gas laid out.
  • Arch Resources is returning significant amounts to shareholders via dividends.
  • Arch is still priced at 2x free cash flow.
  • There has been some unjustified price weakness in ARCH stock.
  • This is now a very attractive opportunity to increase one's allocation to Arch.
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Full Frame texture of energy-efficient black eco-pea coal for heating systems

Damian Pawlos/iStock via Getty Images

Investment Thesis

Arch Resources (ARCH) is a very compelling investment. What's more, the thesis here has nothing to do with its multiple expansion.

In fact, all my assumptions are for Arch Resources' multiple sticking around 2x

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This article was written by

Michael Wiggins De Oliveira is an inflection investor. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year.

With a focus on tech and “the Great Energy Transition (including uranium)”, Michael runs a concentrated portfolio with approximately 15 to 20 stocks and an average holding period of 18 months.

Through his 10+ years analyzing countless companies, Michael has accumulated outstanding professional experience in tech and energy and a following of over 40K on Seeking Alpha.

Michael is the leader of the Investing Group Deep Value Returns.

Features of the group include: Insights through his concentrated portfolio of value stocks, timely updates on stock picks, a weekly webinar for live advice, and "hand-holding" as-needed for new and experienced investors alike. Deep Value Returns also has an active, vibrant, and kind community easily accessible via chat.

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of ARCH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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