Under The Hood: Global X Uranium ETF

Typically, we go for more obscure fare in the Under The Hood column, but we're making an exception in the case of the newly minted Global X Uranium ETF URA because it is becoming apparent all that is holding this ETF is a combination of poor broader market sentiment and investors not realizing there is plenty of life left in the uranium rally. In fact, the uranium party may just be getting started. Even with 2010's big push higher, uranium prices are just barely half way back to their 2008 peak. That might be one reason why URA, just 10 weeks old, has already eclipsed $160 milion in assets under management. That is a not total not seen by some ETFs in their entire lifetimes, so give URA credit for at least capturing investor appeal. The 23-stock lineup is led by Cameco CCJ, the largest U.S.-listed uranium producer. Other names, perhaps only familiar to avid followers of the uranium business, include Denison Mines DNN and Uranium Energy UEC. There's good reason to be bullish on uranium this, as Wall Street Cheat Sheet details: "while uranium is recovering, it has barely recovered in 'real' terms. In other words, relative to commodities and energy commodities, uranium is cheap. Furthermore, while the stocks have recovered, they are trading well off their highs." China and India are also increasing their uranium exposure and some analysts feel a return to pre-crisis prices for the commodity is possible, adding to the bullish thesis behind URA. The previous uranium bull run was fueled by speculation, but the sequel has legitimate supply and demand issues driving pricing and solid fundamentals at several marquee uranium producers, including some URA constituents are in place to drive this sector higher this year. An expense ratio of 0.69% for URA is knock, but that's just looking flaws. URA's biggest near-term obstacle is how much investors choose to dial back risk because uranium isn't considered a "conservative" investment.