Arch Coal filed for bankruptcy back in January seeking relief from more than $5 billion in total debt. The metallurgical coal producer started trading again earlier this month after emerging from reorganization. George Schultze, founder of Schultze Asset Management, is fired up about the stock, saying a leaner Arch is benefiting from higher coal prices and a low valuation. “The company trades at less than four times cash flow,” said Schultze. “And the cash flow is growing rapidly due to rising coal prices.” Schultze added that even though there may be a continuing negative political environment for coal producers depending on the outcome of the election, it is “impossible to make steel any other way than using met coal and this is the largest producer.” Staying in the commodities arena, Schultze is long Energy XXI bonds. Energy XXI, one of largest E&P players in the Gulf of Mexico, is currently in reorganization proceedings, but will emerge by year-end. Today’s bonds create the new company at under 2.5 times its cash flow, which Schultze called a bargain. Schultze is also bullish on Fiat Chrysler , even though the automaker’s stock has had a rough ride this year, falling 32%. Last week, Fiat Chrysler reached a tentative deal with unionized workers in Canada by agreeing to make more than $301 million in investments in local operations. “Fiat Chrysler successfully spun off Ferrari and it could spin off other assets like Maserati so it’s worth sticking with this stock through this rough patch, especially at these very cheap levels,” said Schultze. Finally, Schultze is short shares of Caesars Acquisition Co. , up 86% year-to-date. CACQ stockholders are due to be diluted to 24% ownership of a combined Caesars entity when the company emerges from reorganization in 2017. The combined business will have $9 billion in revenues and operating cash flow of $2 billion, according to Schultze’s forecast, putting the current valuation for the combined company far too high. “This is one of the most complex and litigious bankruptcy cases in history,” said Schultze. “Perhaps the hyperbole is pushing up the value of the combined company to a level which we think is too high.”
Subscribe to TheStreetTV on YouTube:
For more content from TheStreet visit:
Check out all our videos:
Follow TheStreet on Twitter:
Like TheStreet on Facebook:
Follow TheStreet on LinkedIn:
Follow TheStreet on Google+:
source
