The COVID-19-pandemic-induced halt in the construction of new plants, a series of mine closures in Canada, and declining secondary supplies have limited the growth of the uranium industry. However, according to GlobalData, global uranium production is expected to grow at a 6.2% CAGR to 65.2kt by 2025. Resumption of production at Cigar Lake Canada, which accounts for 12-13% of the global uranium output, and several other mines, should drive the growth.
Furthermore, last week the spot uranium price hit $35/lb for the first time in six years, when Sprott Physical Uranium Trust (SPUT) started buying and storing physical uranium in expectation of a sustainable recovery. The optimism surrounding the industry’s recovery is based on a combination of current demand from the world's 445 currently operational nuclear reactors, which provide roughly 10% of global electricity, and the development of new reactors as demand for carbon-free electricity grows.
Given this backdrop, we think ETFs exposed to uranium stocks—Global X Uranium ETF (URA) and North Shore Global Uranium Mining ETF (URNM)—could be solid bets now because they are well-positioned to witness significant upside.
Global X Uranium ETF (URA)
URA provides exposure to a broad group of companies engaged in uranium mining and nuclear component production that are either pure-play or have significant absolute sales in the uranium sector. The fund has approximately $676.4 million in assets under management (AUM). URA’s major holdings include Cameco Corporation (CCJ), NexGen Energy Ltd (NXE), and Energy Fuels Inc. (UUUU).
URA has a 0.69% expense ratio, which is higher than its 0.57% category average. URA has gained 98.4% over the past year and 26.6% over the past six months. The ETF pays $0.13 in dividends annually, which yields 0.56%. Also, it has a 1.18 five-year monthly beta.
URA closed yesterday’s trading session at $23.93 and is currently trading just 2.5% below its 52-week price high of $24.53. The ETF has advanced 26.6% over the past six months and has seen net inflows of $169.91 million during this period. URA’s NAV stood at $17.69.
URA’s POWR Ratings reflect this promising outlook. The ETF has an overall A rating, which equates to Strong Buy in our proprietary rating system.
URA has an A grade for Trade and Buy & Hold. Of the 114 ETFs in the A-rated Commodities ETF group, URA is ranked #15.
North Shore Global Uranium Mining ETF (URNM)
URNM provides access to a group of companies that engage in uranium mining, exploration, development, and production and companies holding physical uranium, uranium royalties, and other non-mining assets. It has approximately $368.1 million in AUM. URNM’s major holdings include CCJ, Uranium Energy Corp (UEC), and Denison Mines Corp (DNN).
URNM has a 0.85% expense ratio, which is more than the 0.57% category average. The ETF has gained 129.7% over the past year and 137.3% over the past nine months. It pays $1.10 in dividends annually, which yields 1.47%.
URNM is currently trading at $74.95, which is 2.5% lower than its 52-week price high of $76.87. The fund has advanced 28.8% over the past month and witnessed $8.11 million in net inflow
It is no surprise that URNM has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It also has an A for Trade Grade, Buy & Hold Grade, and Peer Grade. In addition, it is currently ranked #1 of 39 ETFs in the same group.
URA shares were trading at $24.55 per share on Tuesday morning, up $0.62 (+2.59%). Year-to-date, URA has gained 60.33%, versus a 21.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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