Financial Pros Going Radioactive

Nuclear power is controversial.

Proponents highlight the lack of environmental impact, provided the waste is stored correctly.

Opponents say you can’t ignore the waste, or Fukushima, Chornobyl, Three-Mile Island…you get the picture.

But with oil prices homing in on $100 a barrel, everyone’s attention falls to the alternatives, wherever they may be.

Financial pros are no exception, with search volume for uranium and nuclear power-related ETFs surging in the last two weeks.

We looked at one of the top ETFs in the group to see if this is the best way to play plutonium.

Key Facts About URA

• Net assets: $2.2 billion
• 12-month trailing yield: 1.06%
• Inception: November 4, 2010
• Expense ratio: 0.83%
• Number of holdings: 48

Nuclear power requires uranium, a rare material mined from the earth.

URA targets companies involved in the mining and production of nuclear components.

This includes companies like Cameco, Sprott, and Uranium Energy Corp.

Source: Global ETFs

You probably noticed a lot of odd ticker symbols in the list above.

Most publicly traded companies in the Uranium sector reside in Canada, with Australia coming in second.

The U.S. actually just makes the top 5.

Source: Global ETFs

Performance

We were surprised to see the performance from the ETF.

Apparently, uranium and nuclear power companies have done exceptionally well over the last five years.

Source: Global ETFs

What’s interesting is that if you go back too far, the fund’s performance deteriorates dramatically.

That’s because from its inception until around 2017, the fund sank like a stone.

Then again, so did stocks in the sector.

Competition

We pulled ETFs related to nuclear and uranium and broader materials and resources to give us a good sense of where URA stands.

• North Shore Global Uranium Mining ETF (URNM): Invests over 80% of its assets in securities, with at least 50% of its assets in uranium and supporting activities.
• Invesco DB Base Metals Fund (DBB): The DBB invests more broadly in industrial metals using futures.
• First Trust Indxx Global Natural Resources Income ETF (FTRI): A bit niche, FRTI invests in high-yielding securities in the upstream segment of the natural resources sector (Energy, materials, agriculture, water, and timber).
• VanEck Vectors Uranium+Nuclear Energy ETF (NLR): Similar to the other ETFs, NLR invests in compares directly involved in or supporting uranium and nuclear, using the same 50% asset threshold as a requirement.

There was a wide disparity in performance amongst the different ETFs. Nuclear itself has done incredibly well while natural resources and materials floundered.

Clearly, institutional money is betting big on the nuclear space.

Note: URNM is a 3-year return that’s inflated over what we’d expect it to be had it existed for at least five years.

Our Opinion 10/10 

Given the options, we like URA because it has a longer history, a lower expense ratio, and a larger set of holdings than its peers.

Plus, it’s got the best liquidity, making it ideal for both retail and institutional investors.

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