The Global X Uranium ETF has rallied in the last 12 months, with governments once again turning to nuclear power amid a mounting energy insecurity crisis. This has pushed the fund’s largest holdings into the green and left them with strong analyst ratings going forward.
- Uranium industry boosted as the world reconsiders nuclear power.
- Largest holding Cameco soars 43% in the last 12 months.
- Global X Uranium ETF top holdings receive positive analyst ratings.
The Global X Uranium ETF [URA] has performed relatively well over the last year despite the challenges facing the wider markets. The fund has risen 6.6% in the last 12 months, while the S&P 500 dropped 6.2% over the same period.
The ETF, which targets investments in companies within the uranium mining and refining sectors, has benefited from a brightening outlook for the uranium industry, as the world has begun to reconsider the potential of nuclear power.
The energy insecurity prompted by Russia’s invasion of Ukraine almost exactly one year ago has pushed many countries to consider alternative sources, in order to ensure they have a steady supply of affordable energy. As a result, many nuclear energy decommissioning plans have been reversed, boosting the share prices of companies operating within the sector.
The Global X Uranium ETF has a large exposure to the price of uranium through its Sprott Physical Uranium Trust Fund [U-UN.TO] holding, which is its second-largest with 9.07% of assets under management (AUM). The fund, which holds physical uranium assets, has risen 25.7% in the last 12 months.
Uranium producer Cameco predominates
Cameco [CCJ] is the top holding in the Global X Uranium ETF and makes up 24.76% of AUM as of 16 February. As a result, the performance of the fund is heavily dependent on that of one of the world’s largest uranium producers. Happily, Cameco shares have jumped 42.9% in the last year and are already up 27% since the beginning of the year.
The company invested $2.2bn in Westinghouse Electric back in October, bringing Cameco to a 49% stake in the US nuclear fuel and maintenance company.
The fund’s fourth-largest holding is NexGen Energy [NXE], at 5.65% of AUM. NexGen shares have risen some 11.3% in the last 12 months.
The company is focused on developing its 100%-owned Rook 1 site into the world’s largest low-cost uranium mine. The company is still in its research stage, and has yet to report a profit.
Countries re-evaluate nuclear plans
Governments have begun reconsidering their stances on nuclear power in the last few months, with Australia, Sweden, Germany, Japan and California among the major economies that have reconsidered nuclear decommissioning plans or all-out bans over the last year.
In Japan, for example, the 2011 Fukushima nuclear accident led to assurances from the government that it was essentially phasing out nuclear. However, the government recently announced a policy extending the current 60-year limit on the operation of nuclear reactors, as well as allowing for the construction of new units to replace older ones.
Thus, on the back of a strong outlook for the uranium industry, analysts are highly optimistic about the top shares held within the Global X Uranium ETF. For Cameco, the largest holding within the fund, out of the 12 analysts polled by Refinitiv, five rated the shares a ‘buy’, six ‘outperform’ and one ‘hold’.
NexGen Energy shares are also collecting strong analyst ratings. Out of 10 analysts polled by Refinitiv, three rated the shares a ‘buy’ while the remaining seven believed that shares will ‘outperform’.
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