Cheap Coal Stocks Are Luring Contrarian Investors — Even as the Industry Remains Deeply Unpopular
Coal remains one of the most reviled sectors in the investment world. But that may be exactly why some are betting big on its comeback.
Despite falling out of favor in the early 2000s, coal demand could remain strong through 2030, according to a recent report from energy consultancy Wood Mackenzie. Predictions of coal’s demise have frequently proven premature, especially as nations struggle to balance clean energy goals with energy security and affordability.
“The long-term shift toward renewables is intact, but the road is far more complicated than many expected,” said Anthony Knutson, global head of thermal coal markets at Wood Mackenzie. “Energy security and cost concerns are reshaping the landscape.”
That backdrop set the stage for the launch of the Range Global Coal Index ETF (ticker: COAL) earlier this year. The $20 million fund, managed by Range Fund Holdings, is one of the few focused ETFs available to investors. CEO Tim Rotolo says the decision to launch COAL was driven by a rising global focus on reliable electricity generation—amplified by the war in Ukraine and resulting energy price shocks.
“When there’s a crisis, energy reliability takes center stage,” Rotolo told MarketWatch. “Not climate targets. Not lowering global temperatures.”
The fund’s top holdings include Yancoal Australia, Warrior Met Coal, and Alliance Resource Partners. It’s evenly split between metallurgical coal (used for steelmaking) and thermal coal (used for power and heating). Though down 21% since launch, Rotolo sees long-term value, especially as its demand holds steady and supply contracts.
The ETF fills a unique niche. “There was no coal ETF,” Rotolo said. “Just like we seek contrarian stock ideas, we also look for areas with limited ETF competition.”
Range Fund also manages a nuclear-focused ETF (NUKZ), which has surged 75% since launching alongside COAL earlier this year—underscoring investor appetite for alternative energy plays.
Rotolo points to Peabody Energy as an example of opportunity in the sector. The stock cratered to under $1 in 2021, down from $45. Today, it’s trading around $17. With environmental, social, and governance (ESG) pressures limiting its companies’ access to financing and insurance, many firms are simply returning capital to shareholders.
“They couldn’t raise capital to invest in growth,” he said. “All they could do was buy back stock or retire debt. That’s often when you want to be buying.”
The investor flight from coal has turned into a binary bet on the industry’s survival—but Rotolo sees mispriced opportunities. “The consensus has been wrong over and over,” he said. “That’s where you find value.”
More important than demand, he argues, is supply. “Even if demand stays flat and supply collapses, prices could skyrocket. That’s a setup for strong coal stock performance.”
China and India, which continue to grow their energy needs, remain major demand drivers. And for countries like India, coal remains the most viable short-term solution due to delays in gas turbine availability and limits of renewable infrastructure.
“Asia’s young coal fleet is evolving alongside the renewables boom,” added Wood Mackenzie’s Knutson. “But it isn’t going away anytime soon.”
