As coal prices rise on increasing demand from reopening economic activities and high global power usage, we think Alliance Resource (NASDAQ:ARLP) and Arch Resources (ARCH) should benefit. But which of these two stocks is a better buy now? Read more to find out.Alliance Resource Partners, L.P. (ARLP) in Tulsa, Okla., is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States. The company operates through three segments: Illinois Basin; Appalachia; and Minerals. In comparison, Arch Resources, Inc. (ARCH) in St. Louis, Miss., produces and sells thermal and metallurgical coal from surface and underground mines. The company sells its products to utility, industrial, and steel producers.
Last year, the coal industry was one of the worst-hit industries, owing to reduced global energy demand and weak commodity prices. However, the rising demand for coal with increased power usage and high natural gas prices, coupled with the continuing decline of utility stockpiles heading into the winter heating season, have driven a surge in coal prices. Transportation challenges and supply chain problems are also contributing to the rise in coal prices. In addition, domestic utilities have leaned on coal-fired power generation to meet rising electricity demand. And the continuing post-COVID economic recovery and reopening of the industrial sector should drive the coal industry's growth. Therefore, we think both ARLP and ARCH should benefit.
ARLP stock has gained 9.8% in price over the past three months, while ARCH has returned 1.4%. Also, ARLP’s 80.7% gains over the past nine months are significantly higher than ARCH’s 67.3% returns. And ARLP is the clear winner with 135.9% gains versus ARCH’s 90.1% returns in terms of year-to-date performance.