Coal was one of our best performing sector groups in latter 2007 through summer 2008. While much of the focus of late has been on natural gas, the coal stocks have been ripping in even larger magnitude. I was a bull on coal over natural gas (although the market in its student body left trading simply moves all commodities together) because of the portability of coal over natural gas. We were early on this theme as the market was so focused on oil stocks at the time, and made a lot of money [Dec 6, 2007: Coal Stocks Quietly in Bull Market] I wrote a bevy of pieces about this 1.5 years ago… but again, the market is not very granular nowadays; it likes big sweeping themes that are simple: i.e. commodities good.

I have a litany of posts on just about every major coal producer in the archives, but for a simple way to play the sector there is an ETF which we introduced January 2008 [Jan 14, 2008: New Coal ETF (KOL) Introduced from Van Eck Global] 

The Coal ETF seeks to replicate, before fees and expenses, the total return performance of the Stowe Coal IndexSM. The Index provides targeted exposure to 60 companies worldwide that are engaged in the coal industry. As such, the Fund is subject to the risks of investing in this sector.

….is another interesting ETF with a very global mix, much like MOO and a nice 1 stop shop. It is very top weighted with the 5 top names making up 35% of holdings

….. followed by fund holdings Consol Energy (CNX) and Peabody Energy (BTU) @ 7.5% and 7.3% respectively. Further down the list are two names who deal with the mining equipment end, Joy Global (JOYG) and a name I have been considering adding to the fund multiple times Bucyrus (BUCY) @ 4.6% and 4.3% respectively. Also in this group are Arch Coal (ACI), fund holding Massey Energy (MEE) which focuses on metallurgical coal, and Yanzou Coal (YZC). The entire index can be found here. By geography the US represents 40%, Hong Kong 24%, Indonesia 11%, and Australia 9%.

The ETF has 60 names, but again in a strategy I find useless the bottom third of the ETF is full of names with 0.1%, 0.2%, or 0.3% exposure.

I almost pulled the trigger on a coal name last week on the pullback but did not do so, which in retrospect was a lost opportunity. Looking at the ETF, the chart is a technician’s dream – it just broke out of a double top while concurrently breaking over the 200 day moving average – hubba hubba. While volume is slowing a bit, notice the huge increase in May versus the months before.

Full Story:  http://www.forexhound.com/article/Stocks/Stocks/Market_Vectors_Coal_KOL_Red_Hot/134056

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