URA: Growth in key energy demand, strong momentum in uranium and nuclear stocks

There is no stopping the topic of artificial intelligence. As first-quarter earnings season winds down on Wall Street, FactSet reports there has been a record spike in references to “artificial intelligence” on corporate conference calls. Then just last week, NVIDIA (NVDA) reaffirmed the robustness of AI, beating top and bottom-line estimates while raising its dividend and announcing a 10:1 stock split.

We have also seen a showcase for the utilities sector as the effects of AI expand. The reality is that more demand will be placed on data centers Pressure on the electricity gridNew sources of energy are needed to fuel today’s economy. Uranium and nuclear energy are two of those areas.

I am promotion Uranium X Global ETF (NYSEARCA: ORA) From waiting to buying. I was interested in the fund in March 2023, but I was waiting for bullish chart developments before I issue a buy rating. The breakthrough actually occurred the following summer.

Artificial intelligence dominates corporate conversations

Goldman expects significant growth in US energy demand through 2030

According to the source, URA provides efficient access to a basket of companies engaged in uranium mining and production of nuclear components. Global

URA is a fast-growing ETF, now with over $3.5 billion in assets under management. When I first analyzed the product early last year, the value of assets under management was just $1.3 billion. Along with rising asset prices, investor inflows have been impressive with this ETF. URA Annual expense ratio 0.69% Not that cheap, but the fund paid off 12-month trailing dividend yield of 5.25%.

What’s more, Stock price momentum It has been very impressive in the past few months, earning an A+ ETF rating by Seeking Alpha. Prospective investors should be aware that the fund can be… Volatile sometimesIts somewhat concentrated allocation poses another risk. Still, Liquidity metrics Strong with average daily volume of over 3 million shares, while the 30-day average bid/ask spread is tight at three basis points.

Looking more closely at the portfolio, the ETF with a 4-star Morningstar Bronze rating plots on the far right side of the style box, indicating its bias towards a growth style. Although only 18% of URA is considered value, there is significant size diversification given that more than half of the fund is invested in small and mid-cap companies.

Naturally, after rising strongly since the first quarter of last year, the P/E multiple has expanded from 14 when I last reviewed URA to just over 18 today. However, with a long-term EPS growth rate of 18%, the PEG ratio is very attractive at just 1.0.

URA: Portfolio profiles and factors

URA is of course a focused bet on growth in the uranium and nuclear segments of the market, but this also means that there is a significant allocation to the energy sector. More than 70% of ETFs are invested in this small sector of the global equity arena.

There is also a slight increase in the weight of the cyclical industrials sector. Materials and information complement the customization. Investors should pay special attention to what’s going on with Cameco Corp (CCJ) – the world’s largest publicly traded uranium producer, headquartered in Canada.

URA: Holdings and earnings information

Seasonally, URA tends to struggle through most of the latter half of Q2, but with stocks up 10% in the past month, bulls have supported the ETFs through any type of bearish seasonal pattern. But June has also been a weak month recently, so some caution is warranted here.

URA: Continuation of the weak seasonal period

Technical take

With a strong valuation, focused portfolio, and seasonality, URA’s technical chart is impressive. Notice in the chart below that stocks broke out of a consolidation pattern in the third quarter of last year. The $23 to $25 area was major resistance after a long-term pullback from the highs of $31.60 achieved in late 2021 through March 2023. The bulls will soon take over, as evidenced by the long-term moving average of 200-day URA which turned positive over the back half of last year.

Today, I still see a positive trend. I would like the ETF to definitively rise above the 2021 high on better RSI momentum. We may see that happen soon – take a look at the volume profile at the bottom of the chart. There has been an increasing amount of shares traded in the past six months, which is a sign of potential institutional accumulation. With significant volume in terms of price from $31 to $18, there should be plenty of natural buyers on the pullbacks.

Overall, I see support in the mid-$20s and look for continued gains after last year’s bullish breakout.

URA: Long term uptrend, some problems at old highs

Bottom line

I upgrade the URA from Hold to Buy. Following positive technical developments and with a strong basic premise (not to mention an attractive rating), this thematic play looks to be solid heading into the rest of 2024.