Investors seeking a strong point entry into mining stocks will have their work cut out for them. With the rise of emerging market economies since the turn of the milleneum, miners, especially companies digging for hard commodities like copper and iron ore, have generally benefitted from a voracious demand for metals that has often exceeded supply.
In recent months, however, the prospects for the same rate of growth out of emerging market economies, in particular China, has become far more ambiguous than it has in some time, and a substantial number of analysts have been predicting a possible major price cut for previously in-demand metals, as stockpiles begin to overtake demand.
Add to this the cyclical nature of basic materials stocks, and what you have is a space in which it is difficult to find worthwhile equity investments, at least ones off the beaten path. Companies whose business is dependent on mineral as opposed to metals mining may offer a interesting angle on the space, however.
The following four companies are all listed in the non-metals mining industry. They were selected based on positive year-to-date performance, but more importantly for their strong operating margins. Operating margin, or the amount of money a company has left after paying the costs of production, is one of the most important metrics by which to measure any basic materials company. These companies are all sporting very healthy operating margins, which is very likely an indication that money is being well-managed, and moreover is available for future operational contingencies.
Alliance Holdings GP, L.P. (AHGP)
Market-Cap: $3.5 billion
Year-to-Date Return: 29.70 percent
Operating Margin: 19.70 percent
Suncoke Energy Partners, L.P. (SXCP)
Market-Cap: 853.75 billion
Year-to-Date Return: 53.7 percent
Operating Margin: 16.60 percent
Westmoreland Coal Co. (WLB)
Market-Cap: $210.70 million
Year-to-Date Return: 54.60 percent
Operating Margin: 5.30 percent
Rhino Resource Partners LP (RNO)
Market-Cap: $201.50 million
Year-to-Date Return: 7 percent
Operating Margin 23.90 percent