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.
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, it’s important to note that the smaller
underlying company sizes and consolidated portfolios can enhance volatility.
Read more
Benzinga.com small-cap articles: http://www.benzinga.com/news/small-cap
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necessarily reflect those of Smallcappower. Smallcappower does not endorse
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