‘U’ Can’t Beat Uranium

Climate change, limitations placed on solar and wind energy and storage technology and ever-increasing costs of hydrogen energy are three reasons why nuclear energy has become far more compelling to investors in recent years.

Clean energy is not only better for our environment, but for most, better for our conscience. Now, as all my readers know — I not only research my recommendations thoroughly, I like to make sure that we are all on the same information page.

So, let’s start with a simple breakdown of the nuclear energy opportunity. Nuclear energy is a form of energy released from the nucleus — the core of two atoms. This energy can be produced in two ways: nuclear fission — when the nuclei of atoms split into several parts, and nuclear fusion — when the nuclei fuse together.

Today’s production of nuclear energy focuses mostly on nuclear fission, which, once started, creates a chain reaction, if there is fuel.

Said fuel is the reason I believe “U” can’t beat uranium. For all my science lovers out there, I hope my elemental joke will amuse, since “U” is the chemical symbol for uranium.

Uranium-235 is the fuel used for almost all nuclear fission and it is the isotope that can produce a fission chain reaction. Now, mining uranium is not an everyday mining task — as it is a radioactive material. Therefore, the mining companies that deal with this material are specialized. Exploration, mining, development and production of uranium are all lucrative ventures given the specialized nature of the radioactive substance.

So, let’s profit from those companies’ profits and take a look at an exchange-traded fund (ETF) that may be a breath of clean air: Sprott Uranium Miners ETF (URNM).

URNM offers investors access to a plethora of global companies involved in all the processes above, as well as companies that hold physical uranium, uranium royalties and other non-mining assets.

The companies within URNM’s portfolio must devote 50% of their assets to business operations related to uranium. URNM’S selections are based on industry publication reviews, sell side research, fundamental research and meetings with management. Once selected, these qualified companies are split into two categories that make up the holdings within the portfolio: Miners (82.5%) and Holders (17.5%).

URNM has net assets of $1.35 billion and is currently trading at $43.76, which is at the higher end of its 52-week range, $28.22-49.53.

The chart below tells a compelling tale, one of strength and a desire for uranium. While there was a dip in the early months of the year, it is obvious that the ETF was not phased as it has currently rebounded to stellar highs.

Courtesy of stockcharts.com.

URNM’s top holdings include National Atomic Co. Kazatomprom JSC ADR (KAP), 17.08%; Cameco Corp. (CCO.TO), 13.85%; Sprott Physical Uranium Trust Units (U-UN.TO), 12.29%; CGN Mining Co. Ltd. (1164.HK), 5.60%; Paladin Energy Ltd. (PDN.AX), 5.00%; Boss Energy Ltd. (BOE.AX), 4.52%; Denison Mines Corp. (DML.TO), 4.41%; Energy Fuels Inc. (EFR.TO), 4.31%; NexGen Energy Ltd. (NXE.TO), 4.23% and Uranium Energy Corp. (UEC), 4.22%.

According to a report published early this month, by Jacob White, the ETF product manager of Sprott Asset Management LP, uranium and uranium mining stocks posted their best monthly results in two years, as the price of U308 reached a 12-year high.

The report also highlighted that long-term uranium contracting is on the rise, with 2023 on track to surpass 2022, coinciding with a decade of underinvestment.

Moreover, the World Nuclear Association (WNA) estimates that uranium demand will double by 2040.

In summation, “U” can’t beat uranium.

As always, investors should conduct their own due diligence before adding any stock or ETF to their portfolio holdings.

I will leave you with this gem from well-known theoretical physicist, Albert Einstein: “Nuclear power is one hell of a way to boil water.”

I am always 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.