Filed Under: ,
Tickers in this Article: ICLN, NLR, PKN, URA, DNN, USU, CCJ, UEC
As the world continues to grapple with the need for more energy, some focus is being shifted away from traditional sources such as oil and coal, and onto alternatives. Funds like the iShares S&P Global Clean Energy Index (Nasdaq:ICLN) have sprouted up to take advantage of this shift. While solar, wind and biofuels will undoubtedly make up some of the future energy pie, some former energy superstars are getting a new lease on life; nuclear energy is experiencing a revival. Longer term, all of this reactor building can have direct benefit for portfolios.

IN PICTURES: 5 "New" Rules For Safe Investing

Moving Beyond Previous Roadblocks
Even though the Three Mile Island and Chernobyl disasters occurred decades ago, many are still haunted by tragedies. These two events have caused the number of new reactors built to become stagnant. However, as governments around the world look for carbon neutral ways of providing enough power for their citizens, nuclear energy is once again picking up speed. One pound of uranium can produce more energy than 20,000 pounds of coal with a fraction of the carbon output.

Developing and emerging markets are large sources of this demand for new nuclear power with China leading the way. According to the Wall Street Journal, the nation is currently constructing twenty-six new reactors, more than twice as many as the next biggest builder, Russia. The nation also has plans to begin construction on an additional 120 reactors over the next few years, and a top administrator for China's nuclear power agency recently gave a speech in which he estimated that China could add approximately 112 GW of nuclear capacity by 2020. A similar story is emerging in India, where the nation expects to have 20,000 MW of nuclear capacity by 2020 and over 63,000 MW by 2032.

The IAEA (International Atomic Energy Agency) has been continually revising its 2030 nuclear growth projections upwards and expects total worldwide nuclear capacity to double in the next 20 years.

Bullish for Uranium
All of this new reactor construction will ultimately benefit the uranium miners. Analysts estimate that China will need 50 to 60 million pounds of uranium per year. However, the country only domestically produces around two million pounds. In addition, Russia is ending its nuclear-weapons decommissioning program in 2013. Recycled Russian nuclear warheads make up a substantial portion of world uranium reserves. Altogether, you have bullish recipe for increased uranium prices.

Both the Market Vectors Nuclear Energy ETF (NYSE:NLR) and PowerShares Global Nuclear Energy (NYSE:PKN) offer investors exposure to the entire industry including construction firms, utilities and miners. However, investors may want to take a look at the uranium miners themselves as analysts predict that prices could add another $15 to $20 a pound through 2011.

The Global X Uranium ETF (NYSE:URA) tracks a basket twenty-three different uranium miners including Denison Mines (NYSE:DNN) and USEC (NYSE:USU). The fund has performed well in its short life returning nearly 20% to investors. The ETF's holdings are highly concentrated in Canada and charges 0.69% in expenses.

For investors wanting a single company bet on uranium, Cameco (NYSE:CCJ) holds nearly 16% of the worlds reserves. The miner recently struck a deal with China's second-largest builder of nuclear plants, agreed to buy 29 million pounds of uranium through 2025. The stock has rallied over the course of the year, but still trades at a P/E of 18. The stock could still see gains as uranium prices are far from their $130 pre-recession peak.

The Bottom Line
As the world continues to search for new carbon neutral forms of energy, nuclear power will remain in the spotlight. Investors wanting to play this trend in increased generation from atomic energy might want to focus on the uranium miners. Companies such as Uranium Energy (NYSE:UEC) are poised to take advantage of this growth. (Learn how global warming is starting to heat up America's corporate climate. See Can Business Evolve In A Green World?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus

Trading Center