How To Invest in Nuclear Power (Uranium ETF Review)
Nuclear power has a bad rap. In fact, most environmental, social, and governance (ESG) funds screen out nuclear energy stocks. Yet many scientists and environmentalists, including Bill Gates, argue that we can’t get to net zero carbon without nuclear power. Many countries, notably China, are planning new nuclear reactors. Here is how you can invest in nuclear energy today.
SustainFi Updated September 14, 2021
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Is nuclear power a solution to climate change?
Nuclear power has a lot of problems. Nuclear power plants are very expensive to build, nobody wants a nuclear reactor in their backyard, and nuclear waste is hard to store. Human error can cause accidents, notably the 2011 Fukushima disaster in Japan, and everyone has heard of Chernobyl.
Moreover, uranium, the mineral used by nuclear reactors, can be converted for use in weapons. Unlike wind or solar, uranium is a finite resource, so nuclear energy is not renewable.
And yet, many environmentalists, including Bill Gates, argue that we can and must resolve these problems because nuclear power is essential in solving climate change. Gates has suggested that cars kill people too (in fact, many more than nuclear power), and we have made cars much safer through innovation.
In addition, millions of people die from pollution caused by fossil fuels each year. (One study shows that pollution from fossil fuels killed 8.7 million people in 2018 alone.)
Why nuclear power is valuable
According to the International Atomic Energy Agency (IAEA), nuclear power is the second largest source of low-carbon electricity today. 10% of the world’s electricity was generated from nuclear energy in 2019. Nuclear power also represents about 20% of the U.S. energy supply and 70% of the energy generation in France.
Nuclear power is valuable because it doesn’t emit carbon, doesn’t require much land, and is always there. Other sources of clean energy, like wind and solar, are intermittent, seasonal, and require expensive infrastructure to transport them from places where they are abundant to those where they are not. Solar and wind farms also take up a lot of space, and permits for offshore wind in the U.S. are hard to come by.
Unlike wind and solar, nuclear doesn’t rely on breakthrough innovation in energy storage that would enable us to store wind and solar power when they are plentiful.
Why nuclear power should grow
Despite the setback to nuclear energy following the Fukushima disaster, the world is waking up to the importance of nuclear power in reducing emissions. Although the U.S. has retired 40 nuclear reactors since 1960, with retirements hitting a record in 2021, the tide is starting to shift.
In the U.S., the Biden administration has included nuclear power in its clean energy plan. The American Nuclear Infrastructure Act, reintroduced in June 2021, seeks to expand America’s nuclear energy sector. In June 2022, the U.S. Department of Energy invested $61 million in nuclear R&D projects across America.
Founded by Bill Gates, the nuclear innovation company TerraPower is building its first nuclear power plant in Wyoming. The U.S. Department of Energy announced a $160 million investment in TerraPower and X-Energy, a nuclear reactor and fuel design engineering company.
Countries outside the U.S. are also waking up to the nuclear promise. There are 445 nuclear reactors globally. According to the World Nuclear Association, 54 more are under construction. More are being planned. China has 51 reactors, generating less than 5% of its electricity needs from nuclear. 18 more are under construction.
If you want to participate in the nuclear power revival, you have several options.
Funds that invest in nuclear energy
There are three U.S.-based ETFs that invest in nuclear energy, generally through stocks in uranium miners or utilities. One closed-end fund also buys physical uranium.
Used as a nuclear fuel, uranium is a radioactive metal extracted from the ground. The largest deposits of uranium are in Australia, Kazakhstan, and Canada.
Uranium prices have climbed from $25 per pound in January 2020 to $39 in September 2021.
The top four uranium and nuclear funds
|Fund||Ticker||Fund Type||Expense Ratio||Assets ($m)||1Y Performance|
|Global X Uranium ETF||URA||ETF||0.69%||843||113%|
|North Shore Global Uranium Mining ETF||URNM||ETF||0.85%||406||114%|
|VanEck Uranium+Nuclear Energy ETF||NLR||ETF||0.61%||28||29%|
|Sprott Physical Uranium Trust||SRUUF||Closed-end fund||0.35%||1,100||NA|
Global X Uranium ETF (URA)
- Assets under management: $843 million
- Holdings: 45
- Expense ratio: 0.69%
- 1-year return: 113%
Launched in 2010, the Global X Uranium ETF (NYSEARCA: URA) is up 61% in 2021 and 113% over the past year. It is the largest uranium ETF available today. The fund tracks a basket of around 40 companies involved in uranium mining and the production of nuclear components.
The fund’s top investments are uranium miners in Canada and Kazakhstan. Its top three holdings are Canadian uranium miners Cameco (NYSE: CCJ) and NexGen Energy (NYSEAMERICAN: NXE) and Kazakh miner KazAtomProm. Cameco alone is over 23% of the fund. Around 50% of the fund’s assets are in Canada, followed by Australia, South Korea, and Kazakhstan.
North Shore Global Uranium Mining ETF (URNM)
- Assets under management: $406 million
- Holdings: 34
- Expense ratio: 0.85%
- 1-year return: 113.9%
Launched in 2019, the North Shore Global Uranium Mining ETF (NYSEARCA: URNM) is the second largest uranium ETF.
Like URA, the fund invests in uranium miners in Canada, Kazakhstan, and Australia. URNM also invests in physical uranium. Potential investments are identified through industry publications review, sell-side research, and fundamental research, as well as meetings with management.
The top three holdings are Canadian uranium miner Cameco (NYSE: CCJ) , Kazakh miner KazAtomProm, and the Sprott Physical Uranium Trust (more on that below). 87% of URNM’s holdings are also in URA, though URA has more holdings (45 to URNM’s 34.)
VanEck Uranium+Nuclear Energy ETF (NLR)
- Assets under management: $28 million
- Holdings: 24
- Expense ratio: 0.61%
- 1-year return: 29%
Launched in 2007, the VanEck Uranium+Nuclear Energy ETF (NYSEARCA: NLR) is very different from the two uranium ETFs, URA and URNM. URA and URNM mostly invest in uranium miners, but NLR is focused on utilities that use nuclear energy. (Utilities are 87% of the fund’s assets.)
In fact, URA and NLR only have three overlapping holdings (out of NLR’s 24). NLR mostly invests in U.S. and Japanese companies, and its top three holdings are Duke Energy (NYSE: DUK), Dominion Energy (NYSE: D), and Exelon Corp (NASDAQ: EXC). Because of its overexposure to utilities, NLR underperformed the miner-investing peers.
Sprott Physical Uranium Trust (SRUUF)
- Assets under management: $1.1 billion
- Expense ratio: 0.35%
- 1-year return: NA (launched July 2021)
If you don’t want to invest in miners, Sprott offers a way to invest in uranium the commodity directly. Listed in July 2021 on the Toronto Stock Exchange, The Sprott Physical Uranium Trust (SRUUF) is the world’s largest physical uranium fund. This is a closed-end fund you can buy through major brokers. It may also be responsible for a lot of the recent rally in uranium prices.
Note: the fund is currently trading at a material premium to its net asset value.
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Nuclear energy stocks
Individual uranium and nuclear power stocks are riskier than ETFs because you can be subject to idiosyncratic risks. But if you like stocks, here are some uranium mining ideas:
Cameco (NYSE: CCJ)
- Market capitalization: $9.7 billion
- 1-year return: 124%
Based in Saskatoon, Saskatchewan, Canada, Cameco is the largest publicly traded uranium company. It owns uranium mines worldwide, including in Canada, Kazakhstan, and Australia. In 2015, Cameco was the world’s second largest uranium producer, accounting for 18% of global production. It holds about 455 million pounds of proven and probable reserves on three continents.
NexGen Energy (NYSEAMERICAN: NXE)
- Market capitalization: $2.8 billion
- 1-year return: 230%
NexGen Energy is another Canadian uranium miner. It owns a portfolio of uranium exploration assets in the Athabasca Basin in Canada.
Denison Mines Corp (NYSEAMERICAN: DNN)
- Market capitalization: $1.3 billion
- 1-year return: 236%
Denison Mines Corp. is a Canadian uranium miner best known for its uranium mining in the Athabasca Basin region of northern Saskatchewan, Canada.
Nuclear energy will likely remain controversial, but it is moving back into the spotlight. If you believe in its promise, there are multiple ways you can invest.
🔔 Looking for other ways to invest in climate change solutions? Consider electric car batteries.