In the age of energy-conscious consumers who are opting for electric vehicles and solar homes, coal stocks seem to be a relic of a forgotten era. Recent strength in this segment, however, may have traders and investors rethinking their views on coal mining companies as an investment opportunity.
The MarketVectors Coal ETF (NYSE:KOL) is the only ETF that tracks the niche global coal industry. This ETF has amassed $180 million in total assets spread between 36 worldwide companies.
Oftentimes the first (and only) ETF dedicated to a small industry has an advantage in terms of first-mover publicity that gives it an edge in asset gathering and notoriety.
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All companies within KOL must derive at least 50 percent of its revenue from the coal industry. This allows for a broad range of sector diversification that includes energy, industrial and material groups. Top holdings in this market-cap weighted index include: Joy Global (NYSE:JOY), Consol Energy (NYSE:CNX) and Peabody Energy (NYSE:BTU).
This ETF also has just 38 percent of its portfolio positioned in the United States. The remaining country exposure includes heavy weightings in China, Australia and Thailand. KOL appears to be a truly global investment vehicle.
KOL has just barely edged back into positive territory for the year. Since hitting a low at the end of January, however, this ETF has raced 10.17 percent higher and appears to be poised for another breakout to new year-to-date highs.
The stocks in this ETF have come under fire in recent years as investors turn to alternative energy sources. As of July 31, the three-year annualized track record for KOL is -25.85 percent.
However, some investors might view that underperformance as a value opportunity to pounce on a beaten-down sector. From a technical standpoint, KOL is now back above both its 50- and 200-day moving averages. This could indicate that a new counter trend rally has taken hold.
While no one knows how far the rally might go, for the moment investors are relishing the strength in coal mining stocks.
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