With global warming mania sweeping the globe, much attention has been focused on alternative energy sources. While some of us are quite cool to the global warming theory (the fact that the earth is cooling may have something to do with it), hundreds of billions of dollars have been invested developing new methods of energy creation that are supposedly friendlier to the environment than crude oil or coal. From harnessing wind or the sun to electric cars, everyone is trying to get in on the alternative energy/cleantech boom. In fact, President Obama made the development of alternative energy a cornerstone of his presidency.
Until now, one key source of alternative energy had been largely ignored by the general public. This changed last month when President Obama proposed to triple public financing of nuclear power. Nuclear power has always had very vocal critics, but the dirty little secret is that it is the most widely used source of alternative energy in use. While there hasn’t been a new nuclear power plant built in the US in 30 years, according to the European Nuclear Society (ENS), in Europe there are 17 currently under construction to go with 194 facilities already in use. The ENS reports, “In terms of electricity generated by nuclear energy in 2008, France holds the top position with a share of 76.2%, followed by Lithuania with 72.9%, the Slovakian Republic with 54.4%, Belgium with 53.8% and Sweden with 42 %.” Japan generates 30% of its electricity from nuclear reactors. China can’t seem to build the power plants fast enough.
With the world already generating large amounts of energy via the nuclear route, and the U.S. (which already generates about 20% of its energy via nuclear) apparently making a push in that direction, it appears that nuclear power — not wind — is the real alternative energy of the present and future.
How to Invest
The question for investors is how to potentially capitalize on this trend. Here are 3 ways that you can invest and gain exposure to the nuclear industry:
Exchange Traded Funds (ETFs): There are currently 3 ETFs that track companies across the globe that deal with nuclear mining, storage, infrastructure and utilities. The 3 ETFs are: iShares S&P Global Nuclear Energy Index Fund (NUCL), PowerShares Global Nuclear Energy Portfolio (PKN), and Market Vectors Nuclear Energy (NLR). It is very important to note that these 3 ETFs all are very different in the makeup of their respective indices, and there is great variance in their returns. Investors need to drill down and find the right ETF for the aspect of this investment that they want to capitalize on.
Uranium: Uranium is a key ingredient in nuclear reactors. There are many uranium miners which trade publicly. Many are very small and trade with a lot of volatility. The smallest news release can send one of these stocks soaring or cascading. Uranium stocks can be considered a classic example of investing based on risk versus reward. These stocks can really be high fliers, but conversely can melt down at any moment.
Infrastructure: Investors can invest in companies that run nuclear power plants or offer engineering, construction, and consulting services for nuclear plants. For these investors, infrastructure stocks that deal in this area would be the way to go. In many cases these are very large, established companies that are not solely reliant on the nuclear industry. Nevertheless, these companies derive enough of their revenues from this industry that if nuclear really takes off, they stand to potentially profit.
Investing in the nuclear industry may not be for the faint of heart, and investors should speak with their financial professional to see if it fits into their financial plan. With careful research and proper allocation, investing in the nuclear sector may give your portfolio the charge that you are looking for.
Disclosure: No positions