|3/13/2017 by mdc|
|Tom Lydon, of ETF Trends, opines that after a multi-year run of disappointing investors, the Global X Uranium ETF, which holds uranium miners, started rebounding in significant fashion in the 4th quarter. That ebullience has carried into 2017 with the uranium exchange traded fund higher by more than 23%.|
However, investors still need to approach URA with some caution. For example, URA has pulled big in a big way after touching a 52-week high. From that high above $19, URA now resides closer to $16, a decline that took just a few weeks to materialize.
Adding to the recent pressure on URA is that uranium prices continue sliding. As is the case with other mining equities stocks and ETFs, rare are the occasions when these investments rise while the material they mine loses value.
Do not be swayed by the arguments of future nuclear reactors in China, India, etc. Instead focus on the here and now. The uranium futures chart is telling you the truth, not the so-called experts marketing their investment newsletters. When the price of uranium turns decidedly positive, then and only then is it time to start investing in uranium companies, according to a Seeking Alpha analysis of URA and uranium.
Earlier this year, uranium prices saw temporary relief after U.S. and five other permanent UN Security Council members backed plans for Iran to receive a 116 metric tons of natural uranium, with a huge shipment of natural uranium from Russia.
The uranium market has also been steadily strengthening as negative sentiment surrounding the 2011 Fukushima disaster in Japan reversed. Japan has been paving way for its nuclear power plants to restart operations. But there are concerns regarding URA.
The structure of URA is tenuous. 15 of the 22 stock holdings are penny stocks, i.e. a stock price less than $1. Lydon expects that the majority of these companies will fail in the next couple of years, or suffer large cash infusions that will dilute shareholder equity.
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