Contrarian Siddles is King of Coal

In August this year Siddles took positions in his F&C US Smaller Companies Fund and the F&C US Smaller Companies plc investment trust in thermal coal producer Foundation Coal, Walter Industries, a metallurgical coal producer, and Ohio-based mining equipment manufacturer Bucyrus International.

"Back in the summer many investor grew bearish on coal prices because as stock piles were high and there were concerns over regulations. However, I am by instinct a contrarian. These are the exactly the sort of stocks that I like to target: namely, well managed but out of favour companies and most definitely undervalued," explained Siddles.

"The weak dollar has made US exports incredibly competitive. The export boom has been especially pronounced in coal as South African production has been pretty much gobbled up by India, where some utilities have reportedly exhausted their supply down to as little as seven days. This has been very positive for the US coal exporters, who have taken up the slack in Europe."

Since investing in the companies, Foundation Coal is up 37%, Walter Industries by 43% and Bucyrus International by 40%.

Siddles concluded: "Over the last eighteen months the US market has favoured momentum rather than value investors. However, a lot of sound companies have suffered from across the board mark downs as a result of the recent market turmoil to the extent that some real bargains are starting to register on our radar."