Use Uranium ETFs to Power Your Investment Strategy
Growing interest in nuclear energy led to an optimistic outlook for the sector. Developed countries are investing in new infrastructure and extending the lifespan of their existing nuclear facilities as a result of this boom.
Growing energy concerns and the increasing need for dependable and eco-friendly energy sources are also fueling the surge. The ability of nuclear power to cut carbon emissions has brought it back into the public eye.
The recent boom in the value of uranium can be traced to increased demand and years of prevailing low prices resulting in a restricted supply of the metal. Future projections for the sector look promising and investors can use the following pure-play uranium ETFs to capitalize on the metal’s growth trajectory. Global X Uranium ETF URA, Sprott Uranium Miners ETF URNM and VanEck Uranium+Nuclear Energy ETF NLR can be considered.
Nuclear Energy: Sustainability and Demand
According to South China Morning Post, recent climate challenges grappling the world shifts the focus of the global economy toward providing cleaner and a low-carbon energy source. A statement by G20 in the month of July concerning energy transition, highlighted the role of nuclear energy in both emission reduction and ensuring energy security, which can also be seen as a potential indicator of the resurgence of nuclear power.
Given that their power output is far more steady than intermittent sources like solar or wind, nuclear reactors are also capable of supplying baseload demand, which is the minimum amount of electricity a grid needs.
This resurgence is particularly evident in Asia, where China, South Korea, Japan and India lead the charge in embracing nuclear power once more.
With the world racing toward the goal of net-zero emissions by 2050, nuclear power is emerging as a crucial solution to bridge the energy deficit gap. According to CNBC, not only is nuclear energy clean and scalable, it also provides reliability and tackles the intermittency problem faced by other sources of renewable energy like solar and wind.
Situation in the United States
According to the World Nuclear Association, the United States is the global leader in the production of nuclear power, constituting around 30% of global nuclear electricity generation.
Construction of Vogtle Plant’s Unit 3, the country’s first nuclear reactor built from scratch in the last 30 years, came as a turning point for the U.S. nuclear energy industry. Vogtle 4 is projected to succeed Vogtle 3, which is believed to start operation in early 2024.
The Inflation Reduction Act also offers backing to the nuclear energy industry, by supporting in terms of investments and tax incentives to existing and new nuclear plants.
Concerns Surrounding Nuclear Energy
Being the second-largest source of low-carbon energy, nuclear power does face skepticism due to concerns regarding safety. Issues concerning storage and safety of the power plants, which became prominent after the Fukushima nuclear power plant disaster in Japan, as per the CNBC article, continue to be misunderstood.
New designs for power plants ensuring enhanced safety, better training and increased efficiency help nuclear power in remaining one of the safest sources of generating energy. However, the challenge of safely storing nuclear waste is not completely resolved, with geopolitical issues like the Russia-Ukraine war increasing the possibility of nuclear power plant accidents.
The apprehension is the cost factor and project management associated with constructing the power plants, given their history of frequent cost overruns and delays which end up pushing the projects over budget. The difficulties include running across public opposition in different nations.
ETFs in Focus
Global X Uranium ETF (URA)
Global X Uranium ETF seeks to track the Solactive Global Uranium & Nuclear Components Total Return Index with a basket of 46 securities. The fund has amassed an asset base of $1.6 billion and charges an annual fee of 0.69%.
Global X Uranium ETF has an exposure of 24.3% in Cameco CCJ which is one of the largest uranium producers globally. URA has 47.4% of its assets invested in Canada, followed by Australia with 13.1%. Allocating 66.59% of assets to its top 10 holdings and 34.99% to small caps, combined with geographical allocations, raises concentration risk for the fund.
However, URA has generated 15.19% year to date and 6.64% over the past month (as of Aug 22), trending upward since early March of this year.
Sprott Uranium Miners ETF (URNM)
Sprott Uranium Miners ETF seeks to track the North Shore Global Uranium Mining Index with a basket of 37 securities. The fund has gathered an asset base of $974.26 million and charges an annual fee of 0.85%.
Sprott Uranium Miners ETF has an exposure of 17.55% in Cameco. With around 56.6% of its assets in Canada, and 50.79% and 76.32% of the fund’s assets parked in small caps and the top 10 holdings, respectively, concentration risk is also a concern for URNM.
However, it has generated 17.04% year to date and 11.63% over the past month (as of Aug 22), trending upward since early March.
VanEck Uranium+Nuclear Energy ETF (NLR)
VanEck Uranium+Nuclear Energy ETF tracks the performance of MVIS Global Uranium & Nuclear Energy Index with a basket of 26 securities. The fund has an asset base of $79.45 million and charges an annual fee of 0.61%.
VanEck Uranium+Nuclear Energy ETF has an exposure of 8.68% and 7.32% in Constellation Energy Corporation CEG and Cameco, respectively. The fund does bear concentration risk, with 40.60% of assets in the United States and 59.42% in the top 10 holdings.
NLR has generated 15.27% year to date and 4.91% over the past month (as of Aug 22), trending upward since late March.
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Constellation Energy Corporation (CEG) : Free Stock Analysis Report
Cameco Corporation (CCJ) : Free Stock Analysis Report
VanEck Uranium+Nuclear Energy ETF (NLR): ETF Research Reports
Global X Uranium ETF (URA): ETF Research Reports
Sprott Uranium Miners ETF (URNM): ETF Research Reports
