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Wall Street Bets Triggers Uranium Rally: ETFs to Tap

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Energy prices have been on the rise this year on a recovery in demand from the worst of the COVID-19 lockdowns as well as limited supplies. Although natural gas and coal are surging to new heights, uranium has surged to the highest level since 2014 (read: Natural Gas ETFs Spike on Storm Threat and Tight Supply).

Most of the rally was driven growing social media attention. This is especially true as the Wall Street Bets forum, which spark an enormous rally in the so-called meme stocks like GameStop GME and AMC Entertainment AMC this year, has now zeroed in on uranium. Retail investors on Twitter are banking not only on uranium reversing its nearly decade-long bear market, but also kicking off a " Nuclear Renaissance," that will mark a radical transformation in energy production.

Additionally, the launch of the Sprott Uranium Physical Trust in mid-August contributed to the rally. Investment firm Sprott Inc. recently commented on Twitter about how much physical uranium it had been buying, aiding the commodity’s recent bull run. Sprott has amassed over 24 million pounds of uranium, sometimes buying more than 500,000 pounds in a single day, according to its website and social media account.

The restart of nuclear reactors in Japan after 10 years and the growing uranium supply deficit, being accelerated by COVID-19 pandemic related production cuts, are also driving the atomic fuel prices. Investors should note that Japan has been bringing dormant nuclear reactors back to life and now has nine operating reactors – the highest number since the Fukushima Daiichi disaster in 2011. The country is reportedly considering doubling the share of renewables in its power grid over the next decade, according to a Wall Street Journal report (read: Japan Topix Hits 30-Year High: ETFs to Tap).

Further, the global shift toward clean and green energy sources is a big boon for uranium, leading to higher prices. According to the latest World Nuclear Association's Nuclear Fuel Report, world nuclear generating capacity is set to grow2.6% annually with demand for uranium fuel increasing over the period to 2040.

Notably, uranium futures on Nymex surged 15% last week, making it the best weekly gain in more than a decade and before the 2011 Fukushima nuclear disaster crashed demand for the commodity.

Investors seeking to ride the rally in uranium prices could consider the following ETFs:

Global X Uranium ETF URA

This ETF provides access to a broad range of companies involved in uranium mining and the production of nuclear components, including those in extraction, refining, exploration, or manufacturing of equipment for the uranium and nuclear industries. It tracks the Solactive Global Uranium Total Return Index. Holding 45 stocks in its basket, it is highly concentrated on the top firm, Cameco, with 23.4% of total assets while the other firms hold no more than 9.3% share. The ETF has amassed $814.5 million in its asset base and charges 69 bps in annual fees. It trades in a solid average daily volume of more than 696,000 shares and has soared 26.4% over the past month (read: 5 Best ETF Areas of Last Week).

North Shore Global Uranium Mining ETF URNM

This ETF provides exposure to companies that are involved in the mining, exploration, development and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 85 bps in annual fee. The ETF holds 35 stocks in its basket with a heavy concentration on the top two firms accounting for about 14% share each while other make up for no more than 8.9% share. It has accumulated $464.8 million in its asset base and trades in a good volume of 127,000 shares per day on average.

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Global X Uranium ETF (URA): ETF Research Reports
North Shore Global Uranium Mining ETF (URNM): ETF Research Reports
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