Three Ways to Invest in Nuclear Power

Middle East turmoil recently pushed up the price of crude oil, as I wrote in Friday's edition of Small Cap Investor Daily, Why Unrest in Libya Could Be a BOON to Europe's Natural Gas Market.

It is also a stark reminder that the world remains addicted to fossil fuels. In the years ahead, you'll hear about a growing roster of countries turning to nuclear energy to meet their electricity generating needs.

A pound of uranium, proponents of nuclear energy argue, can generate as much energy as 20,000 pounds of coal - while reducing harmful emissions to just a fraction of the coal 'status quo'.

Over the next 20 years worldwide use of nuclear energy is expected to nearly double. For example, the World Nuclear Association says in this report that China has 13 nuclear power reactors in operation already, with 25 more under construction.

Americans are becoming more receptive to nuclear energy as the benefits over fossil fuel power become more apparent. A February survey sponsored by the Nuclear Energy Institute found that more than 70 percent of Americans favor the use of nuclear energy as a source of U.S. electricity. Certainly this group is not entirely unbiased, but the results are still noteworthy.

Right now, about 20 percent of the U.S. electricity grid is lit up by nuclear power, with the remainder mostly reliant on fossil fuels.

The surge in nuclear power demand is likely to be a boon for investors who buy the right stocks in the sector. In fact, 100 percent, or even one thousand percent, gains over the next several years are not beyond the realm of expectations. To give you a head start investing in this space I'll take a quick look at a few small-cap companies that have the potential to become bigger players in the nuclear energy space.

***In December I wrote about Uranium Energy Corp. (AMEX: UEC) and the company's plans for south Texas. The stock has been bouncing around since then, without a clear resumption of the upward trend that pushed it above $5.00 in November of 2010. Uranium Energy's main projects are the Goliad and Palangana projects in Texas. Analysts project the company could be profitable on a normalized basis (excludes one time charges and other non-reoccurring events) in 2011 and on a GAAP basis in 2012.

Uranerz Energy Corp. (Amex: URZ) is another company beginning to show promise. The stock finished 2010 with a 210 percent return. It's based in Canada, but its exploration territory is centered in the Powder River Basin in Wyoming, an area that's been producing uranium for more than 50 years.

The company closed 2010 by completing $20 million in financing, and opened 2011 with a permit from the state of Wyoming to mine its Nichols Ranch Uranium project, which holds an estimated 5.5 million pounds of uranium. Now it awaits final Nuclear Regulatory Commission approval, with production expected in early 2012.

Uranerz Energy uses in-situ recovery (ISR) mining that injects groundwater to bring deposits up for processing, theoretically a minimally intrusive, low-cost extraction method.

The stock is up 26 percent so far this year.

If you prefer a broader investment to gain access to uranium mining, there's a new exchange-traded fund available, the Global X Uranium ETF URA. Launched last November, this ETF tracks the Solactive Global Uranium Index. It has $209 million in net assets allocated to 24 holdings, including 3.2 percent in Uranerz. Since its debut, its price has risen 20 percent.

These are just a few suggestions, as always make sure to complete your own due diligence before buying shares in any company or ETF.

Disclosure: NONE