Uranium ETFs explode – the Madison Leader Gazette

0


Nuclear power has a bad reputation. Say “Chernobyl” or “Three Mile Island” and many remember dangerous and costly incidents that had negative effects for years to come.

But with the consequences of fossil fuels becoming more apparent every day, some are touting nuclear power as a clean, zero-emission source of energy worth considering. And that change of mind has boosted the assets and returns of nuclear power ETFs over the past year.

Uranium-linked ETFs had an explosive day on Tuesday alone. The North Shore Global Uranium Mines ETF (URNM) increased by 13.5% while the Global X Uranium ETF (URA) gained 11.7%.

This increase comes on top of the solid gains of both funds over the past year. As with most thematic ETFs, there is considerable dispersion between the three ETFs that are part of the nuclear energy ETFs.

The two uranium ETFs clearly outperformed the VanEck Uranium + Nuclear Energy FNB (NLR), which has a broader vision of the nuclear energy space.

URNM and URA have posted triple-digit gains over the past year, with URNM up 216%, while URA has gained 146%.

While both of these ETFs have seen a steady uptrend for much of the past year, they went nuclear in August and September. From August 22 to September 15, URNM gained over 91%, while URA gained 61%. A look at how these different ETFs are constructed gives an overview of the performance differences between these funds.

Look under the hood

URNM tracks a market capitalization weighted index of global companies in the uranium industry, including those involved in mining, exploration, development and production. It is also exposed to companies that hold physical uranium, uranium royalties or other non-mining assets. The ETF is rebalanced quarterly.

One of the main holdings is Sprott Physical Uranium Trust, which represents 8% of the portfolio. Sprott grabbed the headlines this summer by embarking on a buying spree in the spot uranium market. The company increased its holdings by 45% in four weeks, pushing the price of radioactive metal up 65% in the space of a month.

Contextual Image

Contextual Image

Graphic courtesy of FactSet

(For a larger view, click on the image above)

URNM’s two largest holdings have also performed well over the past year. National Atomic Company Kazatomprom is up 183%, while Cameco Corporation has gained 152%. Both of these companies are uranium miners and have seen their stock prices rise due to increased demand.

Contextual Image

Contextual Image

Graphic courtesy of FactSet

(For a larger view, click on the image above)

URA’s portfolio includes a lower weighting of National Atomic Company Kazatomprom and a higher weighting of Cameco. This ETF is also capitalization-weighted, with half-yearly replenishment, and offers no exposure to physical uranium.

Different views in the same space

As seen with our ETF comparison tool, the URA portfolio offers a bit more diversification at a cheaper price. URA is 16 basis points cheaper than URNM and has a smaller average spread.

Contextual Image

Contextual Image

Graphic courtesy of FactSet

(For a larger view, click on the image above)

The fund also has more holdings and greater sector diversification, with exposure to industries and utilities that URNM lacks. However, both funds remain highly concentrated and vulnerable to industry risk.

Contextual Image

Contextual Image

Graphic courtesy of FactSet

(For a larger view, click on the image above)

Rally powered by Reddit

Along with the organic forces of supply and demand driving prices up, uranium mining companies have also caught the attention of Reddit, adding fuel to the fire in their exponential rise. Reddit has hosted several “meme stock” gatherings this year, starting with GameStop in January.

And while uranium has cooled off highs reached in this Reddit-led rally, there are signs that the gains for these ETFs have yet to hit their half-life.

The Biden administration has advocated for the creation of a government-funded uranium reserve to help it meet its clean energy goals. This idea was also supported by President Trump, including allocating $ 75 million in funding towards the goal included in last December’s COVID relief bill.

Currently, US power plants import more than 90% of their uranium from foreign sources, including Kazakhstan and Russia, which some see as a national security risk.

Contextual Image

Contextual Image

(For a larger view, click on the image above)

As with many other commodities, producers are likely to increase supply in response to rising prices.

However, this increase in supply will take time to become available. The renewed interest in nuclear power, both at home and abroad, could stimulate demand in the future. This combination of forces could prove to be explosive for the yellow metal in the future.

Contact Jessica Ferringer at [email protected] or follow her on Twitter

Recommended stories

Permanent link | © Copyright 2021 ETF.com. All rights reserved



Leave A Reply

Your email address will not be published.