Still Just One ETF For Coal M&A

News of Arch Coal's (NYSE: ACI) $3.4 billion offer to acquire metallurgical coal producer International Coal (NYSE: ICO) has, not surprisingly, prompted speculation as to who will be next to be acquired in the coal space, a sector that on a global basis has shown it is ripe for consolidation.

Still unbeknownst to some investors there are actually two coal-specific ETFs listed in the U.S. The Market Vectors Coal ETF (NYSE: KOL) is the big kahuna, but the PowerShares Global Coal ETF (Nasdaq: PKOL) has made a name for itself, sort of, as coal prices have surged.

So is one better than the other when it comes to play more coal consolidation? Simply put, yes.

While it would appear KOL is the better way to get involved with the acquirers assuming we see more coal M&A, KOL is actually the preferred bet period.

Here's why: In terms of U.S.-based coal producers that are now being talked about as targets, we're hearing James River Coal (Nasdaq: JRCC) and Patriot Coal (NYSE: PCX) getting chatted up. PKOL only offers 1.4% exposure to Patriot and doesn't hold James River.

On the other hand, those two stocks combine for over 2.1% of KOL's weight. Not amazing, but still better than what we see with PKOL. Looking at global coal names that have been rumored to be takeover targets, Australia's Whitehaven and MacArthur lead that discussion.

PKOL offers a weight of 2.1% to Whitehaven, but no exposure to MacArthur. The two stocks combine for almost 2.5% of KOL's weight.

There is also speculation that Consol Energy (NYSE: CNX) may shop some coal assets to focus more on producing natural gas in the Marcellus Shale and KOL offers a bigger weight to that stock (8.4%) than PKOL (7.26%).

Not to mention, PKOL has some uranium exposure, which could be a plus if that industry consolidates, but post-Japan earthquake, that feature in PKOL has made the ETF lag KOL a bit.