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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect nuclear power to remain with us and to grow over time as oil remains vexing for a number of reasons, the PowerShares Global Nuclear Energy ETF (NYSE: PKN ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is a relatively low 0.75%. The fund is very small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has trailed the market's returns over the past three years, but it's still very young. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 25%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several companies involved in nuclear power had strong performances over the past year. FirstEnergy (NYSE: FE ) , for example, gained 17%, with some happy that it's shutting down some of its older, less efficient coal-burning plants in Ohio. This can be good for utilities, as a lower energy supply can lead to higher prices. The stock received a downgrade in May, though, with an analyst worried about increased regulatory risk in Ohio and New Jersey. Meanwhile, shareholders have been asking for coal-dependence reduction goals and disclosure of coal-consumption waste.
General Electric (NYSE: GE ) advanced about 10%, providing nuclear reactor designs, technologies, and services, among other things. GE is extremely diversified, though, also involved in alternative energies and other businesses, such as engines, lighting, appliances, and financial services. It's expanding into other businesses, too, such as mining. The company got news recently when GE Capital announced that it would resume paying dividends to its parent company.
Other companies didn't do as well last year, but they could see their fortunes change in the coming years. The largest nuclear power operator in the U.S., Exelon (NYSE: EXC ) , for example, sank 5%, pressured by our sluggish economy. Worries over nuclear dangers may be holding the stock back, but America's reliance on nuclear power has far from disappeared, despite even the recent Japanese disaster. Thus, some see the stock as a long-term bargain, especially with its 4% dividend.
Emerson Electric (NYSE: EMR ) also fell 5%, and though few people think of it as a nuclear-power-related company, it's a provider of technology to the nuclear industry with its digital instrumentation, valves, and more. The company's revenue and earnings grew by double digits over the past year, and it's been a solid long-term dividend payer, recently yielding 3.4%.
The big picture
Demand for nuclear power isn't going away anytime soon, as plans for new reactors have been approved. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If industrial stocks interest you, check out our special free report, "3 Stocks to Own for the New Industrial Revolution," which details a new technology that might shift the "Made in China" trend back toward "Made in America."