Market Overview

Coal ETF Punished as Walter Energy Sags

Coal ETF Punished as Walter Energy Sags

Shares of Walter Energy (NYSE: WLT) traded down over 17 percent Friday and reached at levels not seen since March 2004. Making matters worse for the beleaguered coal maker are the facts that Walter's decline has been accrued on more than triple the average daily volume and that the stock is currently halted for news pending.

Although Walter accounts for just 1.93 percent of the Market Vectors Coal ETF's (NYSE: KOL) weight, the fund is showing it is not immune to Walter's woes. KOL is down 2.7 percent Friday on nearly double its average daily turnover after earlier touching a new 52-week low. Scratch that. This is a new 50-month low for KOL. That is right. If KOL closes below $19 today, which looks poised to do, it will be the first time since April 2009 the ETF has done that.

Interestingly, investors have stock by KOL even as it has made a series of new lows and severely lagged the broader market. At the start of trading Friday, KOL was down 24.6 percent year-to-date compared to a 12.4 percent gain for the SPDR S&P 500 (NYSE: SPY). However, KOL has actually seen inflows on a year-to-date basis and outflows of $5.3 million since May 1, according to Index Universe data, considering that with today's loss, KOL is down over 12 percent since then.

The ETF had almost $180 million in assets under management as of Thursday. What it also had was a 30-day SEC yield of 3.92 percent, according to Market Vectors data.

As has been noted, some ETF yields are accidentally high and investors should consider exploiting those situations. KOL probably does not fit that bill.

At least not when the ETF's three largest U.S. based holdings – Consol Energy (NYSE: CNX), Joy Global (NYSE: JOY) and Peabody Energy (NYSE: BTU) – are down an average of more than seven percent in the past month. Those three stocks combine for 23.6 percent of the ETF's weight.

Calling a bottom in KOL has previously proven to be fool's gold, but an educated estimate shows a move below $18 probably means the ETF is headed back to $15, a price not seen since early April 2009.

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