The fund’s 22 holdings also comprise uranium transportation, enrichment and storage companies. Less than 20% of the fund is invested in the uranium producers themselves, which means its performance isn’t as closely correlated with uranium prices but instead is a proxy for global nuclear power production and development.
The 0.57% expense ratio is the lowest in its peer group.
The PowerShares Global Nuclear Energy Portfolio (PKN) takes a similar approach, but with even greater diversification with stakes in 58 companies across the nuclear food chain. These companies are tracked in the WNA Nuclear Energy Index, which aims to represent a market-weighted balance among the different niches of the nuclear industry. For example, one quarter of the fund is tied up in power generation, another 25% in technology, equipment and services, and 20% in uranium producers. The remaining is focused on the construction and operation of nuclear reactors.
The 0.75% expense ratio is the highest in the peer group.
Although the supply and demand factors are poised to alter course, the process may take a year or two to play out. As such, uranium and nuclear power are most suitable as long-term investments.
Yet with concerns about rising levels of carbon dioxide, along with a dawning realization that wind and solar will be able to produce only a small fraction of projected future energy needs, nuclear power—and the spot price of uranium—appear poised for a renaissance.
David Sterman has worked as an investment analyst for nearly two decades. He was a senior analyst covering European banks at Smith Barney and was research director for Jesup & Lamont Securities. He also served as managing editor at TheStreet.com and research director at Individual Investor magazine.