The once high-flying Market Vectors Coal ETF (NYSE:
) is, for what feels like the first time in ages, enjoying a
solid performance in Wednesday trade. Sparked by speculation of
insider buying in Walter Energy (NYSE:
), coal stocks are popping and that is helping KOL to a gain of
nearly two percent.
Not to rain on anyone's parade, but KOL was down 27.3 percent
in the past year at the start of trading and while Walter is up
more than 14 percent on better than double the average daily
volume, the stock's impact on KOL is limited at best. Walter, the
Alabama-based maker of metallurgical coal, is merely KOL's
22nd-largest holding out of 34 stocks. KOL allocates just 1.99
percent of its weight to Walter.
Still, the rally in Walter has Peabody Energy (NYSE:
), the largest U.S. coal producer, and rival Consol Energy (NYSE:
) both up more than two percent. Consol is KOL's largest holding
and Peabody is the ETF's fifth-largest holding. The pair combine
for almost 16.2 percent of the ETF's weight.
Walter's rally is also boosting the fortunes of some of the
coal sector's single-digit "darlings" as Alpha Natural Resources
) is up 6.7 percent on double the average daily turnover while
Arch Coal (NYSE:
) is higher by 5.4 percent. Those stocks combine for 4.8 percent
of KOL's weight.
Hedge Funds The rumors about insider buying at Walter have not
been confirmed by any news outlets and this stock is just a few
days removed from hitting a 52-week low. However, some noteworthy
hedge funds have stakes in Walter,
according to Insider Monkey
That list includes Steven Cohen's SAC Capital Advisors,
Iridian Asset Management, Marathon Asset Management and
Contrarian Capital, among others.
It was also about six months ago that Walter and KOL surged on
speculation that BHP Billiton (NYSE:
), the world's largest mining company, wanted to acquire Walter.
BHP would eventually
deny the rumor
, which weighed on KOL at the start of this year.
Speaking of hedge funds, takeover rumors and Walter, it was
almost two years ago that Audley Capital Advisors was pushing
Walter management to sell the company. At the time,
Audley said Walter was worth $240 a share
. That is more than 12 times where the stock currently
In April, Julian Treger, Managing Partner of Audley Capital
Advisors, said "We believe that the current Board is ill-prepared
to respond to continued price deterioration. Our analysis
suggests that if met coal prices drop further, the Company could
face a liquidity crisis in the foreseeable future and the Board
would be forced to pursue financing that, given what we see as
the Board's lack of sophistication in the capital markets, could
severely impact existing stockholders. We are concerned that the
very directors that created Walter Energy's leverage problem are
ill-equipped to address the issue if met coal prices do not, as
they wish, bail them out of the current situation."
pushing to get five directors placed on Walter's
, although forcing a sale would be better for KOL.
For more on
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