Uranium prices have been on the rise over the past few years. Prices spiked earlier this year after Russia invaded Ukraine, with investors speculating that there could be more demand for alternative energy sources. It has since declined but at more than USD$50/lb, the price of uranium is trading at about double where it was at the end of 2019, before the start of the pandemic.
As a result, uranium stocks have been hot buys this year. Canadian-based uranium producer Cameco Corp (TSX:CCO)(NYSE:CCJ) is up more than 38% thus far. Cameco is the largest holding in the Global X Uranium ETF (NYSE Arca:URA), accounting for 24% of the fund's net assets. However, with 46 holdings in total, the fund is diversified and its gains are also a bit more muted. Its returns are positive and are at over 4%, they aren't as impressive as Cameco's performance this year. Nearly half (48%) of the ETF's holdings are based in Canada, followed by Australia at 14%, South Korea at 9.5%, and the U.S. at 7.2%.
For investors, it comes down to whether you want broad diversification in uranium and businesses that are engaged in a variety of activities within the industry, or if you're okay with investing in just a top uranium stock like Cameco (or another stock altogether), which can lead to a bit more volatility.
The fund's expense ratio of 0.69% isn't terribly cheap but the ETF can still be a way to add some great exposure to uranium, especially if you aren't familiar with the businesses that are involved in the sector.
