The WNA Nuclear Energy Index now has an investable vehicle. PowerShares Global Nuclear Energy Portfolio (NYSEARCA:PKN) is a new ETF to be introduced in the coming week (around April 3rd). The ETF is designed to track the performance of the World Nuclear Association Index. The WNA Nuclear Energy Index is a well balanced, diversified and truly global portfolio of nuclear related companies. The breakdown of the index is as follows; 25% power generation, 25% technology/equipment and services, 20% nuclear fuel, 15% reactor vendors, and 15% construction. The WNA Nuclear Energy Index is comprised of 64 companies. I believe the index levered to the real nuclear economy due in part to the efforts made by the selection committee which is comprised of seasoned industry executives. While this ETF won't be perfect, it does represent the best available vehicle to passively participate in nuclear.
I am not a fan of the Market Vectors Nuclear Energy ETF (NYSEARCA:NLR). It mirrors the DAXglobal Nuclear index, and it was the only nuclear ETF available. The index sector breakdown is as follows; 42.2% uranium mining, 25.6% plant infrastructure, 24.0% nuclear power generation, 4.6% uranium storage, 2.3% uranium enrichment, and 1.3% nuclear fuel transport. This index and the associated ETF are missing out on the lion's share of nuclear power related revenues. And simply put, there's just too much uranium mining. Uranium accounts for less than 10% of a nuclear operation yet in this "nuclear" index it accounts for 42% of the portfolio. For the next decades, there's a great opportunity in companies that are tied to the actual deployment of nuclear reactors.
The industry is seeing a significant upswing evidenced by announcements from countries in virtually every region of the world. The most significant demand for electricity is in India, China, and the Middle East. These are clearly markets where the nuclear industry will be robust. Use the PowerShares Global Nuclear Energy Portfolio (PKN) ETF as a component in a well round portfolio. Also use the WNA Nuclear Energy Index as a "benchmark" for individual stock investments in the nuclear industry. You don't want to be stuck with underperforming assets in a burgeoning market.