Uranium ETFs Are Coming On Strong
Uranium mining companies are a small subset of the energy sector that are engaged in exploring, refining, and supplying material to nuclear utility companies.
Because of the relative obscurity of this niche industry, it has largely flown under the radar when compared to the popularity of solar stocks or traditional oil refiners.
The Global X Uranium ETF (NYSE: URA) is a fund that gives you pinpoint access to these companies by tracking the Solactive Global Uranium Index. URA has a concentrated mix of 24 global stocks engaged in uranium production with total assets exceeding $240 million. The expense ratio to own this fund is listed at 0.69 percent annually.
This ETF is market cap weighted with the largest holdings receiving an outsized share of the fund assets. In fact, the top holding in this ETF is Cameco Corporation (NYSE: CCJ), which has a 23 percent weighting within the index. The average market cap of all companies within the index is currently $1.33 billion, which means the majority of the holdings are small-cap oriented.
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The real story for URA in 2014 has been its phenomenal out performance when compared to a broad-based global small cap index. So far this year, URA has jumped more than 17 percent while the Vanguard FTSE All-World ex-US Small-Cap ETF (NYSE: VSS) has gained just 2.97 percent. This represents a big turnaround for uranium stocks which declined precipitously in both 2012 and 2013.
One potential tailwind for this ETF moving forward is the technical “golden cross” chart pattern, which occurs when the 50-day moving average crosses over the 200-day moving average. This can often indicate a more sustainable uptrend building as a result of the moving averages turning higher and prices building momentum.
Another ETF to watch in this space is the MarketVectors Uranium+Nuclear Energy ETF (NYSE: NLR), which invests in a subset of both uranium miners and nuclear energy stocks. NLR is an even more concentrated portfolio of just 18 stocks, however the industry exposure is more diversified than URA.
Both funds offer investors the ability to capitalize on a niche trend that may grow additional support if we see an expansion of nuclear energy production around the world. However, its important to note that the smaller underlying company sizes and consolidated portfolios can enhance volatility.
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