As a follow up to the most recent Macro Post discussing the possibility of nuclear power comprising a greater share of baseload power, this entry covers some options for investing around this thesis. Most of the investment opportunities for retail investors interested in nuclear energy revolves around uranium mining.
The price of uranium has increased substantially recently. After the price of uranium cratered in the aftermath of the Fukushima disaster in 2011, the miners behind the global uranium industry suffered greatly. Until recently, the cost of uranium production was prohibitive for many miners to invest in new production.
Source: Trading Economics
To gain exposure to uranium mining and nuclear energy, the simplest way is through one of the ETFs focused on this theme. Those seeking to invest in individual companies need to take extra precautions in an already volatile and transitioning industry. Many miners are pre-production, and have yet to prove themselves with either uranium yield or balance sheet management. Others that have proven uranium producing track records have signed long contracts at prices that may cap their upside even with higher uranium prices. Accessing a variety of different companies through an ETF may prove less volatile than trying to pick winners and losers with individual stocks.
For those interested in a fund of uranium miners, Sprott has two ETFs focused exclusively on this sector. The most well know is $URNM Sprott Uranium Miners, which invests in the uranium miners and physical uranium. They also offer the newer $URNJ – Sprott Junior Uranium Miners, which invests in smaller players in the uranium mining industry. Both have international exposure in countries like Canada, Australia, US, and Hong Kong, while $URNM has a large position in Kazakhstan due to its inclusion of Kazatomprom, the largest uranium mining company in the world which focuses on In-situ recovery methods for harvesting uranium.
Sprott Uranium Miners ETF
Source: Sprott ETFs
Sprott Junior Uranium Miners ETF
Source: Sprott ETFs
Another ETF in this sector which has existed much longer than the two mentioned above is $URA – Global X Uranium ETF. This fund has a lot of overlap with $URNM, but has some non-mining companies that are related to nuclear energy production. A fourth, extremely small fund $NLR – VanEck Uranium and Nuclear ETF has even greater diversification away from uranium miners, with much of its holdings including utilities involved in nuclear power generation to complement its uranium miners and other companies related to the nuclear power industry.
Source: GlobalX
Source: VanEck
Uranium has been on a hot run, and it remains anyone’s guess as to whether this run will continue. If there is a secular tailwind in the macro picture that leads to greater uranium demand requiring more supply, this industry could be poised to keep growing. However, the political questions surrounding nuclear power regulations, the secure trade of uranium, and the funding of expensive research and production of nuclear power infrastructure still persist in this industry, despite the renewed interest it has been enjoying.
