Coal has been in the limelight during and after elections this year. Before the elections, the sector saw diverse proposals from both parties. Trump promised to revive the downtrodden coal industry and scrap regulations if elected while Clinton vowed to combat climate change by phasing out reliance on fossil fuel energies and expanding renewable energy production. So Trump’s win could be counted as a boon for the industry (read: 10 ETFs to Watch Today and After The Election).
The coal focused ETF, VanEck Vectors Coal ETF gained sharply after Trump’s triumph. This is because the President-elect plans to bring back the traditional energy businesses of coal, oil, and gas and has expressed skepticism about global climate change in his campaign. However, in the weeks that followed, it saw minor correction. The ETF has added 3.21% in the past one month as of December 5, 2016.
Meanwhile, oil price is also likely to be a major influence on the space. High price of oil could give a boost to the coal energy sector. With the OPEC cartel finally deciding on output cut, this could bode well for the sector (see all Energy ETFs here).
Difficult Path Ahead
However, Trump might find it difficult to lift up the downtrodden coal industry. The black diamond has long been spiraling down due to the growing popularity of alternative energy sources. Global warming and high fuel emission issues associated with coal as well as development of new and advanced technologies making clean power more usable curbed the demand for coal. Several coal producers including Peabody Energy Corporation have incurred losses in the last few quarters. In fact, a coal miner, Arch Coal, filed for bankruptcy and was delisted from the stock market.
Meanwhile, export data for the industry is also not looking good. U.S. coal exports have declined 24% last year and fell another 32% in the first half of this year. This number could worsen with the fifth-largest market for U.S. coal, Canada planning to accelerate its investments in clean energy.
Although alternative energy sources - natural gas and renewables like wind and solar energy - do pose a threat to coal, it remains a dominant source of power generation worldwide. Last year, coal accounted for more than one-third of the total electricity produced in the U.S. However, at current levels, it’s getting tougher for coal to compete with cheaper natural gas alternatives (read: Coal ETF on the Mend: Will the Momentum Last?).
Despite the challenges, investors buying on this Trump induced optimism can focus on the only pure play ETF targeting the coal industry.
Coal ETF in Focus
KOL tracks the MVIS Global Coal Index. Holding 28 securities in its basket, the fund is concentrated in the top 10 holdings at about 61% of the total assets. It has a China focus accounting for 23.4% of the portfolio, while U.S., Australia and Canada round off the next three spots with double-digit weight each.
The fund has amassed $124.5 million in its asset base and trades in an average daily volume of 171,000 shares. Expense ratio comes in at 0.59%. KOL has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: ETFs to Watch if Trump Makes it to White House).
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Are the Dark Days of Coal ETF Really Over?
Coal has been in the limelight during and after elections this year. Before the elections, the sector saw diverse proposals from both parties. Trump promised to revive the downtrodden coal industry and scrap regulations if elected while Clinton vowed to combat climate change by phasing out reliance on fossil fuel energies and expanding renewable energy production. So Trump’s win could be counted as a boon for the industry (read: 10 ETFs to Watch Today and After The Election).
The coal focused ETF, VanEck Vectors Coal ETF gained sharply after Trump’s triumph. This is because the President-elect plans to bring back the traditional energy businesses of coal, oil, and gas and has expressed skepticism about global climate change in his campaign. However, in the weeks that followed, it saw minor correction. The ETF has added 3.21% in the past one month as of December 5, 2016.
Meanwhile, oil price is also likely to be a major influence on the space. High price of oil could give a boost to the coal energy sector. With the OPEC cartel finally deciding on output cut, this could bode well for the sector (see all Energy ETFs here).
Difficult Path Ahead
However, Trump might find it difficult to lift up the downtrodden coal industry. The black diamond has long been spiraling down due to the growing popularity of alternative energy sources. Global warming and high fuel emission issues associated with coal as well as development of new and advanced technologies making clean power more usable curbed the demand for coal. Several coal producers including Peabody Energy Corporation have incurred losses in the last few quarters. In fact, a coal miner, Arch Coal, filed for bankruptcy and was delisted from the stock market.
Meanwhile, export data for the industry is also not looking good. U.S. coal exports have declined 24% last year and fell another 32% in the first half of this year. This number could worsen with the fifth-largest market for U.S. coal, Canada planning to accelerate its investments in clean energy.
Although alternative energy sources - natural gas and renewables like wind and solar energy - do pose a threat to coal, it remains a dominant source of power generation worldwide. Last year, coal accounted for more than one-third of the total electricity produced in the U.S. However, at current levels, it’s getting tougher for coal to compete with cheaper natural gas alternatives (read: Coal ETF on the Mend: Will the Momentum Last?).
Despite the challenges, investors buying on this Trump induced optimism can focus on the only pure play ETF targeting the coal industry.
Coal ETF in Focus
KOL tracks the MVIS Global Coal Index. Holding 28 securities in its basket, the fund is concentrated in the top 10 holdings at about 61% of the total assets. It has a China focus accounting for 23.4% of the portfolio, while U.S., Australia and Canada round off the next three spots with double-digit weight each.
The fund has amassed $124.5 million in its asset base and trades in an average daily volume of 171,000 shares. Expense ratio comes in at 0.59%. KOL has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: ETFs to Watch if Trump Makes it to White House).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>