Peabody: Cash Flow That Outlasts the Narrative

Peabody Energy represents an asymmetry that’s rare in public markets, a hated industry leader generating massive cash, with a valuation that implies an accelerated demise that is unlikely to materialize so swiftly. This is a business that arguably “should not exist” in a perfect world decarbonization scenario, yet it does and it’s outperforming many so-called ESG darlings in profitability. Coal’s demise has been greatly exaggerated, at least on the timescale that matters for investors today. Peabody is positioning itself to be the last man standing and if you believe, as I do, that coal will remain a necessary evil for longer than the market thinks, owning the low-cost, high-quality producer at a bargain price is a high-conviction play.