Uranium has been been one of the best-performing commodities. Prices will take an eventual breather in the natural course of market behavior. But bulls still have more room to run in the long-term horizon.
One indicator of this bullish forecast is history. And history shows uranium can exhibit strong outperformance versus other asset classes when you look at its performance in totality over an extended period.
“Over the longer term, physical uranium and uranium miners have demonstrated significant outperformance against broad asset classes, particularly other commodities,” said ETF Product Manager Jacob White in a Sprott Insights report. “For the five years ended May 31, 2024, the U3O8 spot price has risen a cumulative 275.00% compared to 32.54% for the broader commodities index (BCOM), as shown in Figure 1 (below).”
Figure 1. Physical Uranium and The Metal’s Stocks Have Outperformed Other Asset Classes Over the Past Five Years (5/31/2019-5/31/2024)
Source: Bloomberg and Sprott Asset Management. Data as of 05/31/2024. Uranium Miners are measured by the Northshore Global Uranium Mining Index (URNMX index); U.S. Equities are measured by the S&P 500 TR Index; the U308 Spot Price is from TradeTech; U.S. Bonds are measured by the Bloomberg Barclays US Aggregate Bond Index (LBUSTRUU); Commodities are measured by the Bloomberg Commodity Index (BCOM); and the U.S. Dollar is measured by DXY Curncy Index. Definitions of the indices are provided in the footnotes. You cannot invest directly in an index. Included for illustrative purposes only. Past performance is no guarantee of future results.
Overall, the metal could be at an attractive area of value for investors who were on the sidelines watching the commodity surge. Rising demand amid diminishing supply will only further supply a backdrop of higher prices.
“We believe uranium’s recent pause may be an attractive entry point in the overall uranium bull market,” White added. “A longstanding primary supply deficit and renewed interest in nuclear energy highlight the real challenges to bring the market back into balance. With no meaningful new supply on the horizon for three to five years, we believe this bull market has further room to run.”
Uranium Exposure via Miners
One of the ways investors can get exposure to rising prices of the metal is via miners. On that note, Sprott has a pair of funds worth considering in the Sprott Uranium Miners ETF (URNM) and the Sprott Junior Uranium Miners ETF (URNJ).
URNM tracks the North Shore Global Uranium Mining Index. It invests in global firms that mine, develop, and produce the metal. It also invests in firms that hold the physical metal or royalties from it.
For investors seeking greater growth exposure, small-cap companies can offer amplified moves when markets trend higher. Investors could create a small-cap uranium mining portfolio of individual stocks. But an easier way is via URNJ. The fund seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Junior Uranium Miners Index. That index tracks mid, small, and micro-cap companies in the metal’s mining business.
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