The largest exchange-traded fund to specifically track coal companies has seen a surge in interest this week, following the unexpected presidential victory by Donald Trump, who has promised to “bring back coal 100%.”
The VanEck Vectors Coal ETF KOL, -1.37% has been a strong performer throughout 2016, more than doubling year to date, and it jumped 2.5% on Wednesday, the first trading session following the election. Trading volume on Wednesday neared 1.9 million shares, making for one of the most active days for the fund in its history. About $14.3 million has flowed into the $113.6 million fund over the past month, according to FactSet data.
The ETF fell 1% to $13.73 on Thursday; it traded on volume of about 408,000 shares, well above its 30-day average of almost 250,000 shares.
The recent gains in the fund follow a protracted downtrend for the sector that came as alternative sources of energy—including natural gas and clean energies like wind and solar—have both dropped in price and been more widely adopted. Peabody Energy, once one of the largest players in the space, filed for bankruptcy earlier this year.
“There’s still a long-term threat from natural gas and solar, but the real killer to coal is climate change regulation, and if that’s eased, then it will be more competitive,” said Vic Sperandeo, who runs the Trader Vic Index, a long-short algorithm that has a commodities focus.
The platform of the Republican Party called for the Clean Power Plan to be done away with altogether, and Trump is widely expected to advocate for other environmental-related deregulation.
While changes in government policy could create an improved environment for coal, the threat from different energy sources could limit the gains it could see. The ETF has dropped for five straight years, falling more than 20% in each of them. It fell 57% in 2015.
That drop has taken it to such low levels that analysts said it basically had nowhere to go but up.
“These companies are virtually out of business; coal is a distressed industry that has suffered so greatly it really can’t give up a lot,” said Sperandeo. “Coal won’t ever make new all-time highs, but if it gets some support then it will become a sector you can buy, rather than avoiding it like the plague.”