How to invest in the real alternative energy: Nuclear

From harnessing wind or the sun to electric cars, everyone is trying to get in on the alternative-energy/clean-tech boom.

By AARON KATSMAN
Nuclear Power plant 311 AP (photo credit: AP [illustrative])
Nuclear Power plant 311 AP
(photo credit: AP [illustrative])
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 (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/clean-tech boom. In fact, US President Barack Obama made the development of alternative energy a cornerstone of his presidency.
NUCLEAR POWER
Until now, one large source of alternative energy had been largely ignored by the general public. This changed last month when 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.
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 and 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 percent, followed by Lithuania with 72.9%, 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 US (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 three ways that you can invest and gain exposure to the nuclear industry:
• Exchange Traded
Funds (ETFs): There are currently three ETFs that track companies across the globe that deal with nuclear mining, storage, infrastructure and utilities. It is very important to note that these three 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 that 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 they 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 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.
aaron@lighthousecapital.co.il
Aaron Katsman, a licensed financial adviser in the United States and Israel, helps people who open investment accounts in the US.