Greenlight Capital Is Bullish On Met Coal

Wanted to shoot a quick note out to subscribers as some new information pertaining to one of my largest positions is now available. According to the presentation Greenlight Capital did at the Sohn Investment conference, Greenlight is now bullish on Met Coal.

Why does this matter?

  • Greenlight is a well known institutional investor with AUM of ~$1.4 billion.

  • Before Greenlight got “too big” the fund had annualized returns of 26% for an entire decade.

  • The founder David Einhorn, has received extensive coverage in the financial media and was listed as Time Magazine’s 100 most influential people in the world.

  • Despite the recent poor performance of Greenlight Capital, when they speak, you listen as they are typically directionally right.

  • Greenlight’s recent position and commentary on met coal will likely fuel other top institutional investors to peel back the research and potentially get interested in the space.

If you have been following the letter for sometime you probably already know I am bullish on the met coal space. I have written up multiple articles, here and here, highlighting one of my largest positions that I think has 50-100% upside over the next 12-18 months.

Given my commentary on the space I thought it would be good to highlight Greenlight Capital’s recent position commentary in Teck Resources (“TECK”) and their view on the met coal space. The following was sourced from the Sohn Investment Conference of 2021.

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Now back to Greenlight

It seems like Greenlight is mainly in Teck Resources due to their copper mines but there is a great section that highlights the met coal assets that Teck controls. In fact there are eight slides that specifically call out the met coal assets and why Greenlight is bullish on these assets.

What is interesting is that Greenlight says Teck is trading at 11.0x P/2021E Consensus EPS while the company I have been pounding the table on is trading at 8.8x P/2021E EPS. In addition, the company I like has a squeaky clean balance sheet and is projected to increase production by over 66% over the next couple years with minimal capex investment. Finally, I am expecting net income to more than double in 2020 putting the P/2020E EPS at only 4.2x.

With that being said please check out the slides I pulled from Greenlight’s presentation specifically on met coal.

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