From the moment Prometheus stole fire from the gods and presented it to us, humanity has been concerned with how to fuel our need for energy. One contested, yet efficient and effective, energy source is nuclear power. Approximately 13% of the world’s energy needs currently are met by nuclear power plants, with leading users including Finland, Japan, South Korea, Switzerland and Ukraine. France gets three-quarters of its electricity from nuclear reactors. Uranium is the fuel used in conventional nuclear reactors, and the Global X Uranium ETF (URA) is the exchange-traded fund (ETF) that tracks stocks in the uranium industry.
URA seeks to provide results, before fees and expenses, which correspond generally to the price and yield performance of an index designed to measure the broad-based equity market performance of global companies involved in the uranium industry. The non-diversified fund invests at least 80% of its assets in the securities of the underlying index.
Similar to other commodities, the price of uranium can be highly volatile. URA gained 135% in 2013, but that surge stemmed from prices sinking in November and December 2012, before they recovered sharply in February 2013. Since then, URA has followed a generally downward trend, albeit with periodic rises. Like much of the rest of the market, URA has been down in the first few trading days of 2014.
Focused on a commodity which is largely mined, URA is mostly invested in the basic materials sector, with 90.50% of its assets residing there. It also has some investment in the industrials and technology sectors. The top 10 holdings account for 78.51% of the fund’s assets. These top holdings include Cameco Corp. (CCJ), 23.03%; Uranium Participation (URPTF), 10.34%; Denison Mines Corp. (DNN), 9.58%; Areva, 6.24%; and Paladin Energy Ltd. (PALAF), 6.21%.
Although energy commodities are highly volatile, due partly to the geopolitical fears of terrorism and the possible meltdown of nuclear reactors, there is additional volatility in the uranium markets. Making profits in this sector is highly dependent on getting the timing right. When you hear about news that makes uranium seem attractive to buy, one way to invest in the commodity is Global X Uranium ETF (URA).
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.
In case you missed them, read my commodities-focused e-letters from previous weeks on Eagle Daily Investor about commodities fund GSG and soybean fund SOYB. I also invite you to comment about my column in the space provided below my Eagle Daily Investor commentary.
Doug Fabian has continued to uphold the reputation of the Successful Investing newsletter as the #1 risk-adjusted market timer as ranked by Hulbert's Investment Digest.
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