Well, I’m not uptight
Turn me on tonight
’Cause I’m radioactive…
–The Firm, “Radioactive”
Given the recent shift toward cleaner and more reliable energy sources, interest in nuclear energy is rising. This has led developed nations to invest increasingly in new nuclear power facilities and extend the lifespan of existing reactors. Consequently, the Global X Uranium ETF (NYSEArca: URA) and other funds are performing well in this sector, driven by demand projections and potential sanctions affecting Russia’s energy supply, resulting in increased demand for nuclear power.
The exploration of the uranium market offers a unique insight into the present energy market. To begin with, uranium fuel — which enables nuclear power plants to generate electricity — is a key to the green energy transition. The wide availability of this raw material in countries such as Australia (28%), Kazakhstan (15%), Canada (9%) and others shows potential for nuclear power energy development, as indicated by the data from the World Uranium Association (2022). The advantages include low fuel costs — due to the minimal amount of uranium needed — and using one of the cleanest methods of electricity production, nuclear energy.
Another reason for URA’s excellent performance this year is that the fossil fuel reductions are set to keep uranium demand high. Nuclear power is a green energy source that offers low carbon emissions of just 12KW/h, compared to 820KW/h produced by coal. According to the Office of Nuclear Energy (2022), one Gigawatt of power generated from a nuclear reactor equals approximately 3.125 million photovoltaic (PV) solar panels to produce the equivalent amount of electricity.
Other factors include uranium’s role as a reliable and cost-effective energy source, as well as the construction of new reactors as a proxy for uranium’s future geographical demand increase. With 60 reactors under construction and 436 existing reactors worldwide, this expanded capacity is gaining the attention of investors. Strong support for nuclear energy is coming from China, India and South Korea. On top of that, small module reactors (SMRs) are also on the rise, with more than 70 now under construction.
I see investing in URA as offering multiple benefits to diversifying one’s portfolio, including targeted exposure, ETF efficiency and emerging energy opportunity benefits. Furthermore, URA gives investors access to a broad range of companies involved in uranium mining and the production of nuclear components. Uranium businesses include those engaged in extraction, refining, exploration or manufacturing of equipment for the industries.
The Global X Uranium ETF (URA) seeks investment results that correspond to the price and yield performance, before fees and expenses, of the Solactive Global Uranium & Nuclear Components Total Return Index.
Top holdings in the portfolio include Cameco Corp (CCO.TO, 24.09%), Sprott Physical Uranium Trust Units (U-UN.TO, 10.28%), NexGen Energy Ltd (NXE.TO, 6.28%), National Atomic Co Kazatomprom JSC ADR (KAP, 5.65%), Uranium Energy Corp (UEC, 4.52%), Paladin Energy Ltd (PDN.AX, 4.19%), Yellow Cake PLC Ordinary Shares (YCA.L, 3.28%), Denison Mines Corp (DML.TO, 3.22%), Energy Fuels Inc (EFR.TO, 3.10%) and Mitsubishi Heavy Industries Ltd (7011.T, 2.29%). The total number of holdings in URA is 46, with the majority in the energy sector (77.47%), with the remainder in industrials, basic materials and technology.
As of October 2023, this fund had jumped 7.24% in the past month, 20.14% for the past three months and 29.83% year to date. The fund has net assets of $2.05 billion under management and an expense ratio of 0.69%.
URA allows global investors to expand their portfolios while benefiting from the growing energy sector. However, investors in this ETF should be aware of public sentiment, which could affect the fund, as well as currency fluctuations and other factors that might impact their investments. Beware that risk exists when investing in emerging energy markets, such as uranium, due to increased volatility and reduced trading volumes versus developed markets.
As I always advise, investors should do their due diligence before adding any stock, fund or ETF to their portfolio holdings.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You may just see your question answered in a future ETF Talk.