As the world grapples with the challenges of sustainable and clean energy production, one element stands out for its potential: uranium. Known primarily as the fuel for nuclear power plants, uranium offers a compelling investment case, particularly for forward-thinking Canadian investors.
Canadian investors are uniquely positioned to tap into this opportunity, thanks to the country’s rich uranium resources and high-profile companies like Cameco (TSX: CCO), which currently possesses the capacity to produce more than 30 million pounds of uranium concentrate along with holding 469 million pounds of reserves.
However, Cameco is still just a single stock. Despite being flush with $2.47 billion in cash as of the most recent quarter along with strong year-over-year revenue growth, I’d be hesitant to bet a uranium-centered investment thesis solely on its back. We need some alternatives for greater diversification.
Fortunately, I have just the solution in the form of two uranium-focused exchange-traded funds, or ETFs, that investors can buy to augment a position in Cameco. Here’s all you need to know about them.
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Physical uranium prices
Another big problem with uranium stocks like Cameco is a lack of pure-play exposure. Cameco’s share price might be correlated to the spot price of uranium given its activities and deposits, but it isn’t exact. It’s entirely feasible that uranium could spike upwards, but Cameco does poorly due to a bad business decision.
However, gaining exposure to spot uranium prices is difficult. After all, storing physical uranium is probably really hazardous to your health. The solution here is Sprott Physical Uranium Trust (TSX: U.UN), which currently holds over 61 million pounds of uranium (in the form of U3O8).
This close-ended trust is physically backed. That is, Sprott actually stores real uranium with providers like Cameco. This is one of the most direct ways investors can gain exposure to spot uranium prices in Canada. To buy U.UN, investors will need to pay an annual management expense ratio (MER) of 0.70%.
Global uranium miners
Canada plays a large role in uranium exploration, production, and refinement, but other countries deserve recognition too. A great pick for global exposure is the Horizons Global Uranium Index ETF (TSX: HURA), which passively tracks the Solactive Global Uranium Pure-Play Index.
If you’re worried about not having enough exposure to Cameco, don’t fret. Currently, 23% of this ETF is devoted to Cameco, which is the top holding. The market cap nature of this ETF makes it so that bigger, more dominant companies receive higher proportional representation.
Another great feature of HURA is direct exposure to physical uranium prices via an allocation to U.UN. Currently, HURA holds 16% in U.UN, although it can go up to as high as 25%. This way, you’re not just betting on the performance of uranium miner stocks. HURA charges a 0.86% MER.
