The North Shore Global Uranium Mining ETF is the IBD Stock Of The Day as it flashes a buy signal amid the Russia-Ukraine war.
The URNM ETF has rallied as Europe aims to rely less on Russian oil and gas amid the war. Soaring oil and gas prices due to war disruptions will likely boost the fortunes of nuclear energy and, consequently, uranium.
At the same time, a secular trend is in play. Nuclear energy is likely to fill a role alongside wind and solar energy as governments worldwide aim to use less fossil fuels, meaning less oil, gas and coal.
Those twin factors could mean a larger role for uranium as an energy transition metal, the firm behind URNM ETF says.
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Uranium Mining ETF
Shares of the uranium exchange traded fund on Monday broke resistance around an 85.42 entry. Volatility on the stock market today sent the ETF back below that buy point. Investors could also plot a buy point at 88.09, off the March 10 high. That has the appearance of a handle, although the handle is too low to be valid. So the entry would be an aggressive alternative buy point.
The relative strength line for the URNM ETF has surged this year but remains below the November 2021 high, according to MarketSmith charts. The RS line shows a strong uptrend over the past two decades. A rising RS line means that a stock is outperforming the S&P 500.
Global X Uranium ETF is also acting well in the current market.
Nuclear Energy, Uranium Prices
Uranium is the fuel most widely used by nuclear power plants. Russia's closely allied neighbor, Kazakhstan, is the world's top producer of uranium. Russia and Ukraine are smaller uranium producers, but Russia plays a key role in enriching uranium for reactor fuel and nuclear weapons.
Supply-chain disruptions sparked by the Ukraine war sent uranium prices to decade highs last month.
The spot price of uranium reached $52.35 on March 8. This was 19% higher than its price on Feb. 24, the day that Russia invaded Ukraine. It also reached a 10-year high.
Uranium prices hit a fresh high on March 11. The surge came after the U.S. said it was considering sanctioning Rosatom, Russia's state-owned atomic energy company, as part of its broader sanctions against the country.
The price of uranium languished for about a decade after the 2011 nuclear disaster in Japan's Fukushima.
Inside the URNM ETF: Uranium Mining Stocks
Top stock holdings in the North Shore Uranium ETF include Cameco, Uranium Energy, Energy Fuels, Denison Mines and Nexgen Energy.
The fund holds 38 stocks mainly involved in the mining, exploration, development and production of uranium. It also includes companies that hold physical uranium, such as Sprott.
Exchange traded funds hold a basket of stocks, reducing single-stock risk.
The URNM ETF has a 0.85% expense ratio. It rose nearly 16% in the first quarter of 2022 and jumped 61% in the past year.
It earns an IBD Relative Strength Rating of 89. That means it has outperformed 89% of all stocks in IBD's database over the past year.
Eighteen funds owned URNM at the end of March, according to IBD Stock Checkup. That was up from 10 funds that held the uranium ETF as of June last year.
The adoption of electric vehicles and cryptocurrencies could boost demand for electricity and, in turn, nuclear energy. The Uranium ETF may also benefit from a growing middle class in India and China, with rising electricity demand.
