Since typical retail investors can’t take custody in Uranium and other fissile materials (nor would they want to), the next best thing to play on the future need for nuclear power would be in the companies involved in nuclear power generation and nuclear material mining companies.
(URA) – Last week saw the launch of the most concentrated Uranium-themed ETF, Global X Uranium. With an expense ratio of 0.69%, URA will seek to capitalize on demand for the nuclear material itself by way of holding shares in leading miners. URA has holdings in just 23 companies, with over 3/4 of the companies located in Canada, Australia and the US. Top holdings include Cameco (CCJ), Uranium One (UUU.TO) and Paladin (PDN.TO). These names are surely familiar to investors seeking the best Uranium plays in the past, but with this newly launched ETF, there’s now a relatively low-cost option to diversify risk across companies and regions. URA is not off to a very good start, off about 10% since launch, following the downtrend in commodities miners globally.
(NLR) – The Market Vectors Nuclear Energy – With an expense ratio of 0.63%, NLR seeks to replicate the DAX Global Nuclear Energy index which holds some of the larger generation names you’re probably familiar with in addition to miners like Exelon (EXC), Constellation Energy (CEG) as well as some lesser known names like Fronteer Gold (FRG) and USEC (USU). NLR is up 2% YTD.
(PKN) – PowerShares Global Nuclear Portfolio ETF – With an expense ratio of 0.75%, PKN seeks to replicate the return of the WNA Nuclear Energy Index – focused more so on Uranium miners. Primary holdings include Areva (CEI.PA), Shaw Group (SHAW) and surprisingly, Thermo Fisher (TMO) given their expertise in instrumentation for the nuclear industry. PKN is up 7% YTD.
(NUCL) – iShares S&P Global Nuclear Energy Index – With an expense ratio of 0.48%, this ETF holds 24 companies, but has a heavy reliance on Japan and the US. In recent trading, the volumes have been quite thin, thus leading to a high bid/ask ratio. Given the other more liquid ETFs, this one may not be worth pursuing. NUCL is off 2% YTD.
The macro case for nuclear power generation and materials procurement is strong. Much of the world is emerging from obscurity into modern living and fossil fuels simply cannot satiate the appetite of the new demand coming on line. Green energy and renewable energy are unproven and can’t handle the capacity needed as well. While it may be years until governments and societies start to overcome the “not in my back yard” mentality, reactors are already going up rather quickly in China and Europe is more reliant upon nuclear energy than many assume as well. Since markets anticipate future demand years in advance, it may be high time to consider nuclear ETFs as a secular alternative investment. This map demonstrates global status of nuclear reactor use and new builds:
source: Wikipedia
With the launch of URA and the recent fanfare associated with the new Rare Earth Metals ETF, the demand for common equity shares of miners especially, should remain strong. It shouldn’t come as a surprise to continue to see more similar ETFs launched and funds flow in that direction as we see the bond bubble bursting, gold losing its luster, and deficit fears rattling markets. Who knows, if the global economic expansion in the developing world continues and fossil fuels become further constrained, perhaps nuclear will be the Black Swan Investment of this decade?
Disclosure: No position in any ETFs or equities referenced in this article.
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