In a world focused on reducing carbon emissions, some believe that nuclear will be an essential part of a no or low-carbon energy future. Even as some are going away from it, other countries like Australia are taking a fresh look at nuclear and what it has to offer. While all of this will take years to come to fruition, here are some options for investors willing to consider long-term investments in the nuclear space.
Image Source: Getty Images
1. Exchange Traded Funds (ETFs)
ETFs are probably the easiest way to get exposure to nuclear. The three main ETFs covering the industry are the Global X Uranium ETF (URA -0.19%), North Shore Global Uranium Mining ETF (NYSEMKT:URNM), and VanEck Vectors Uranium+Nuclear Energy ETF (NLR -0.71%). These provide quick and easy access to foreign and domestic companies in the industry. However, just like with any ETF, make sure you understand in what it can be and is invested. Each one holds a different portfolio of companies and will likely return different results. Overall, URA and URNM will provide the most direct exposure to growth in the nuclear industry.
2. Nuclear Technology Companies
There are a number of large industrial and construction companies with operations in the nuclear space. These companies participate in the building of nuclear components, reactors, and/or power plants. However, in most cases, this part of their businesses makes up a fairly small amount of their income. But there are a few companies that an investor could consider.
The first is BWX Technologies (BWXT -0.69%). This company is entirely focused on nuclear activities through the services and products that they provide to the US government and the commercial nuclear industry. The US government accounts for about 80% of their total revenues.
The next company is Brookfield Business Partners (BBU 6.12%). Brookfield's exposure comes from its ownership of Westinghouse Electric Company which it acquired in 2018. In the third quarter of 2019, Westinghouse contributed 24% of Brookfield's EBITDA. Westinghouse provides "nuclear power plants, nuclear fuel, plant automation and operating plant products and services."
Other companies, like General Electric (GE -0.78%) and Mitsubishi Heavy Industries (MHVYF 1.57%), are involved in nuclear, but it is a very small part of their overall business.
3. Uranium Miners
An investment in uranium and uranium miners is a play on the fuel source of the nuclear industry. While not necessarily 100% correlated, the growth of the nuclear industry should be a net benefit for those invested in uranium assets.
Currently, though the price of uranium is depressed. This has made it difficult for uranium miners, and some are cutting production and/or closing mines in order to preserve their assets. An example of this is Cameco (CCJ 0.12%) which has decided to buy uranium on the open market to meet its obligations instead of continuing to mine their reserves at these prices.10
However, for investors open to waiting, some options include Cameco, Denison Mine (DNN -2.17%), Nexgen Energy (NXE -1.20%), and Energy Fuels (UUUU 0.39%). As with the nuclear technology companies, there are a few large companies like Rio Tinto (RIO 0.38%) and BHP Group (BHP 0.10%) (BBL) which also mine uranium; however, for them, it makes up a relatively small amount of their business.
4. Uranium Participation Corporation (UPC)
Uranium Participation Corporation (URPTF) is unique company in the nuclear industry. According to its website, "there are no other known publicly trade investment vehicles which allow investors to indirectly (or directly) invest in physical uranium, without being exposed to the risks associated with investments in companies that engage in the exploration, mining and processing of uranium." UPC is similar to investments like Sprott Physical Gold Trust (PHYS 0.55%) and SPDR Gold Trust (GLD 0.62%) which give investors a publicly traded option to invest in a physical resource. Unfortunately, though, just like these other investments, there are costs associated with it. These ran around 1% of the company's Net Asset Value (NAV) for the year ended February 28, 2019. Denison serves as the "Manager" of UPC, and most of UPC's management are also executives for Denison.
What about utility companies?
You may notice that utility companies were not specifically mentioned here. This is because as customers of the nuclear industry, I do not believe that they will necessarily benefit from growth in the industry. They may see benefits from new and improved technology, but they would likely be hurt if uranium prices increased following higher demand.
While the future of nuclear is far from certain, there are options for the long-term investors who want to position themselves for a resurgence in nuclear energy. Whether through ETFs or individual companies, investors have the ability to get just the exposure that they want.
