The price of uranium has been ticking higher, making nuclear-focused exchange traded funds (ETFs) attractive.
At the time, Richard Kang for Seeking Alpha wrote an article about the price increases last year, ways to get diversified exposure to uranium was through stocks for companies such as Unranium Participation Corp (U) and Cameco (CCJ).
Fast-forward one year, and investors have now got three ways to access the market for nuclear energy: the Market Vectors Nuclear Energy (NLR), Barclays iShares Global Nuclear Energy (NUCL) and PowerShares Global Nuclear Energy (PKN).
Evidence is pointing to emerging markets as the particular market for future growth for nuclear energy, where the stigma and reputation toward nuclear energy is not as great as it is here in the United States. The need for nuclear energy in the developing countries is obvious when you consider the competition for oil within the United States and China. They are in need for alternative energy choices the most.
Kang’s major question is now, do you invest in uranium prices, or uranium producers? He suggests going into nuclear energy as an alternative energy or emerging markets play. Uranium producer space is limited to a few heavies and then to many microcaps and the holding list for the ETFs doesn’t give enough information, so there is some research involved if you are interested in uranium as a commodity.
While there’s no uranium futures ETF, futures are traded on the New York Mercantile Exchange (NYMEX). There are no uranium futures ETFs currently in registration, so if this is an area you’re interested in targeting, you might have to wait awhile.
This illustrates one of the many advantages of ETFs: they simplify what would otherwise be very complex transactions.
For now, the ETF options are restricted to the area of companies that deal with nuclear energy.
- NLR has an expense ratio of 0.65% and is 31% allocated in companies involved with nuclear generation. Japan is 29.9% of assets, followed by Canada at 19.7% and the United States at 17.9%.
- NUCL has an expense ratio of 0.48% and is allocated 54.7% in utilities and 24.7% in energy. The United States is the top country in the fund, with 30.7% of assets, France is 15.7% and Canada is 15.4%.
- PKN has a 0.75% expense ratio. It’s 44.7% allocated in industrials and 24.9% in utilities. The top country holdings are the United States (34.8%), Japan (24.9%) and Canada (11.9%).