ASX 200 coal stocks are having a volatile year thanks to the fluctuations in commodity prices.
Among the major coal miners, it's been a mixed-bag performance.
In the year to date,
- Yancoal Australia Ltd (ASX: YAL) shares are up 26% to $6.54
- New Hope Corporation Ltd (ASX: NHC) shares are down 8% to $4.88
- Whitehaven Coal Ltd (ASX: WHC) shares are down 17% to $6.42
- Stanmore Resources Ltd (ASX: SMR) shares are down 24.5% to $3.07
Mining stocks are directly influenced by the cyclical highs and lows of commodity prices, as global supply and demand evolves.
But Blackwattle Investment Partners portfolio managers Tim Riordan and Michael Teran say there is one ASX 200 coal stock that has a greater capacity to cope with commodity price fluctuations.
Which one is it?
ASX 200 coal stock resilient to commodity price fluctuations
In a recent update, Riordan and Teran said Whitehaven Coal was the largest positive contributor to the performance of its Blackwattle Mid Cap Quality Fund during September.
The managers commented:
WHC rallied 10% in September on improving China sentiment and rebounding metallurgical coal prices.
We view WHC as one of the highest quality mining companies on the ASX, with strong financials and a capital disciplined management team.
Riordan and Teran said Whitehaven had material long-term upside as an improving and enduring quality business.
Their strong conviction in this ASX 200 coal stock allowed them to invest confidently through the recent volatility in the Whitehaven share price.
During September, Whitehaven shares fell to a new 52-week low of $5.45 apiece.
This was a long way off Whitehaven's 52-week peak of $9.08 per share, reached only two months earlier.
What's next for Whitehaven shares?
Looking ahead, the managers said:
We expect more market volatility as China may require more stimulus to offset structural issues.
However, WHC has numerous multiyear internal levers to maintain and improve the business quality beyond cyclical commodity price movements: cost reduction and production improvement in the acquired metallurgical coal mines, paydown of the deferred BHP acquisition payments, Vickery expansion & selldown, Daunia/Winchester South expansion & selldown and further disciplined capital management.
Riordan and Teran commented on the highly uncertain economic environment, which they said had polarised financial markets.
They said bond markets were pricing significant interest rate cuts and a hard landing in the United States.
Meanwhile, equity markets were at all-time highs and pricing in a soft-landing outcome.
This mixed environment tends to be rewarding for high quality companies as earnings certainty becomes a rarer commodity. We believe our portfolio companies are well placed into this dynamic.
News of Chinese stimulus measures last month caused "a significant rotation into Materials which had been consistently the worst performing sector this year".
Materials was the best-performing sector in September, rallying by more than 13% and driving more than 80% of the ASX 200's returns, they said.
The managers commented that investors were returning to more cyclical sectors after the first US interest rate cut and, now, monetary policy easing in China.
We continue to invest in high quality miners with low costs, disciplined management and multiple internal improvement levers to navigate through commodity volatility.
