In this week’s Macro Theme, we review our “Slowing Dragon” theme. We began discuss...
Betting on Nukes and Food
10/11/2007 12:00 am EST
Doug Fabian, editor of Successful Investing and ETF Trader, finds two ETFs that should benefit from the boom in agribusiness and the resurgence of nuclear energy.
The Market Vectors Nuclear Energy (AMEX: NLR) exchange traded fund seeks to track the performance of the DAXglobal Nuclear Energy Index. The index currently represents 38 companies worldwide that are engaged in the nuclear energy industry.
One reason I like this ETF is its diversity: about 46% is uranium mining, 37% is plant infrastructure, and 10% is nuclear equipment. These three market segments are ripe with opportunity, given the renewed interest in nuclear energy both here in America and around the globe.
From a technical standpoint, NLR enjoyed a nice run higher in September. But [recently] we've seen a pullback, [so] the coast now is clear to jump on the nuclear bandwagon.
It's funny that NLR is hot right now, because for a long time anything nuclear invoked a sense of fear in America. Nuclear power plant accidents, though extremely rare, were the subject of apocalyptic prognoses from fear-mongering, anti-nuclear opponents.
Now, however, fear over global warming produced by fossil fuels is seen as a more significant threat to the planet. That has helped nuclear [power] enjoy a return to favor. That's great for us, and great for the future of NLR. (The ETF closed below $42 Wednesday—Editor.)
I [also] want you to make a MOOve (sorry, I couldn't resist) into an ETF that I think is perfectly positioned to take advantage of the current commodities boom—the Market Vectors Agribusiness (AMEX: MOO) ETF.
This ETF follows the DAXglobal Agribusiness Index (DXAG) and includes stocks from 40 companies that are engaged in agriproduct operations, agriculture equipment, ethanol/biodiesel and livestock operations. The companies within MOO generally generate 50% of their income from agribusiness.
One of the things I really like about MOO is that it gives us exposure to some of the best subsectors of the agriculture industry. The ETF also provides us with the opportunity to profit off companies such as Tokyo-based Komatsu, MOO's largest single holding and the world's second-biggest maker of construction and mining machinery. We also get the benefits of grain and fertilizer giant Bunge (BG), which is [also] among MOO's top holdings.
The world is undergoing a global economic expansion the likes of which we haven't seen in many decades. And literally feeding this global expansion are the companies in MOO. Buy this one and get ready to ride the global boom higher. (MOO closed below $47.50 Wednesday—Editor.)
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