Maybe getting a lump of coal in your stocking isn't such a bad thing after all, given the sector's recent performance. In that vein, Van Eck Global today launched the Market Vectors-Coal exchange-traded fund (KOL) on the NYSE Arca. The fund is based on the Stowe Coal Index (COAL), a basket of 60 coal-related-companies listed on various global exchanges.
The Stowe Coal Index, which is calculated and maintained by S&P Custom Indices, gained 103% last year and had an average annual gain of nearly 44% during three-year period ended December 31. Of course, the industry's recent run-up is reflected in the group's equity prices-the collective index sported a price-to-earnings ratio of 40.65 and a price-to-book ratio of 12.26, both as of year-end.
The bulk of the coal ETF comprised mining and production companies (73%), with power generation (15%) and mining equipment (9%) the next-largest sectors. U.S.-listed companies make up the biggest chunk of the index (40%), yet the three largest holdings are two Hong Kong-listed companies-China Coal Energy and China Shenhua Energy Co.-and Indonesia's Bumi Resources. The fund's total expense ratio is 0.65%, and options are expected to be available.
Despite environmental concerns regarding coal-generated pollution, coal remains a vital energy source that's not going away anytime soon, particularly if so-called clean-coal power generating technology becomes more widespread. According to a press release from New York-based asset manager Van Eck, coal provides 25% of the world's main energy demands and 40% of its electricity.
The coal fund is the 10th ETF in Van Eck's Market Vectors series of sector, single country, and municipal ETFs