Two Coal Funds That Add Octane

Despite turmoil in the capital markets, the ETF industry marches on.

PowerShares recently listed several new funds, the most interesting of which might be the PowerShares Global Coal Portfolio(PKOL). PowerShares follows the Market Vectors Coal ETF(KOL) to the market, but there are enough differences that prospective coal investors should look at both.

PKOL has 67% in foreign stocks vs. 43% for KOL. Both are in the high teens for China, but PKOL is also heavy in Australia, at 17%, and in Canada, 16%, vs. KOL's single digits in Australia and practically nothing in Canada.

Depending on your knowledge of the coal industry, once you get past some of the larger holdings like Peabody Energy(BTU) and Consol Energy(CNX), most of the names will be unfamiliar. However, both funds have about 8% in China Shenhua Energy. Such a big weight merits a little study.

One quirk between the two is that, as of Sept. 23, PKOL had at least 13% in uranium companies. Cameco Corp.(CCJ) is PKOL's largest holding. I thought I knew Cameco and, after speaking to two people at Cameco, I was able to confirm that it does not generate revenue from coal. I made two attempts to contact PowerShares but was not able to get an answer as to why there are uranium names in the fund.

That there are uranium miners in the fund is not necessarily a negative, but it is a point of differentiation and could matter to performance. Cameco, remember it is the largest holding for now, has had problems in the past couple of years with flooding at the Cigar Lake project that has hurt the company's financials and stock price. It is a reasonable bet the Cigar Lake will come on line at some point, creating visibility for PKOL to outperform at some point in the future, assuming, of course, CCJ stays in the fund.