This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Seeming Down and Out, Coal Has a Rich Future

Stocks in this article: KOL PKOL JOY BTU CSUAY CNX QRNNF XLE

NEW YORK TheStreet -- Coal companies were one of the worst-performing industries in 2012. This can be tied to decreasing demand for coal in the U.S. thanks to cheaper and increasingly abundant natural gas. While domestic coal demand was down in 2012 and not likely to rebound in 2013, the coal story looks much different in other countries.

China has become the largest importer of coal with fellow emerging-market country Indonesia recently becoming the second-largest importer. While estimates for future, foreign demand vary widely, the International Energy Agency is calling for coal to "come close to surpassing oil" for the world's largest energy source by 2017.

These sorts of predictions are often subject to revisions and updates but it is clear that even if demand continues to decline in the U.S. there are many emerging markets where it will increase.

ETF investors who believe the emerging market tail winds will help the stocks in the group recover and prosper have had two ETFs to choose from with the Market Vectors Coal ETF (KOL) and the PowerShares Global Coal Portfolio (PKOL). Now, however there will just be one coal fund because PowerShares recently announced that PKOL will stop trading in February.

This past year was not great for the energy sector in general, the Energy Select Sector SPDR (XLE) lagged the S&P 500 with its 2.8% gain but KOL was down 23% and PKOL did slightly better with a 20% decline.

The country makeup of KOL will allow it to capture any benefit from increased emerging market demand with a 21% weighting to China, 10% to Australia which is a large exporter of coal and 9% to Indonesia. The U.S. is the largest country weighting at 39% of the fund but some of the U.S. companies in the fund, like Joy Global (JOY)and Peabody Energy (BTU), participate in the global coal market. JOY makes mining equipment that is used all over the world and BTU has mining operations in Australia.

Other large holdings in the fund include China Shenhua Energy (CSUAY)at 8.2%, Consol Energy (CNX), 7.5%, and Australian railroad company Aurizon Holdings (QRNNF), which transports the coal from the mines to ports to then be exported, at 6% of the fund.

KOL pays an annual dividend. The most recent ex-date was earlier this week. The 2012 dividend was 42.5 cents, which gives the fund a trailing yield of 1.71%. The dividend paid by the fund has fluctuated historically but future dividends could increase meaningfully if the estimates for Asian consumption come to fruition.

Future trends in Asia will be the key to whether investing in coal companies at these levels turns out to be well timed. For now this remains a speculative investment relying on a U.S. turnaround and increasing demand around the world.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs