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Capture a Small-Cap & Uranium Rally in One ETF

Large-cap stocks stood head and shoulders above the rest when it came to 2023’s market rally. But combining a small-cap rally with higher uranium prices could potentially produce nuclear gains for investors.

It’s no secret capital markets are expecting Fed rate cuts to push the major stock market indexes even higher this year. That said, last year’s market rally may have already been priced into large-cap stocks.

Small-cap stocks could pick up where the large-cap rally left off in 2023. According to some market experts, that could mean small-caps rising as much as 60%.

“I think small caps could make a bigger move [than large cap stocks], you know 50% or 60%. I think the Russell 2000 could end the year above 3,000,” said Fundstrat’s Tom Lee.

Indeed, there could be a relative overabundance of optimism in large-cap stock valuations if rate cuts were already priced into 2023. Furthermore, there’s no telling when rate cuts will come and at what pace they will happen. The S&P 500 has eked out a gain that’s a sliver under 1% to start 2024. But from a value standpoint, investors may want to give small-caps a closer look.

“Small caps relative to the S&P 500 on a price-to-book basis is back to where it was in 1999, which was the absolute low and was a launch point of 12 years of outperformance for small caps,” Lee said.

Small-Cap Uranium Miners in One ETF

Uranium prices recently jumped to a 16-year high and has full momentum behind it. That’s especially so if more countries become more receptive to its use as an alternative energy source. In turn, with scarce supply and pent-up demand, this should help boost the need for uranium mining.

Rather than piecemeal a small uranium mining portfolio of individual stocks, an easier way is with the Sprott Junior Uranium Miners ETF (URNJ). It  seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Nasdaq Sprott Junior Uranium Miners Index. That index tracks mid-, small- and micro-cap companies in the metal’s mining business.

As mentioned, large-caps were the darling of 2023’s market rally. That’s especially so when it came to big tech,. But when looking at the Russell 2000 and URNJ, the latter rallied to a 37% gain the past year.

URNJ data by YCharts

The stock market index stumbled out the gate to start 2024. But when the same performances of the Russell 2000 and URNJ are juxtaposed year- o date, it’s URNJ that’s ahead once again. Uranium prices in a vacuum could keep pushing URNJ higher. But combined with a small-cap rally, this could potentially buoy prices further if uranium prices settle, or it could amplify gains if the metal pushes higher.

URNJ Chart

URNJ data by YCharts

For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.

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