Craigmillar Energy Fund seeks
to take advantage of the global energy sector’s trend toward decarbonization by investing in alternative energy companies. One of its holdings is the Market Vectors Nuclear Energy ETF (NLR). Given the turmoil in the nuclear energy industry following the Japanese earthquake and tsunami, I asked Craigmillar portfolio manager Clark Gates about his views of NLR. His response:
The reason for our ownership of NLR is to have a broad exposure to the growth in nuclear technology. The reason for our belief in the growth of nuclear technology is based on a long-standing trend in the decarbonization of our energy structure. The trend in decarbonization is the primary focus of our portfolio. This monotonic trend has been measured for over 100 years. Specific technologies, industrial processes, consumer choices, change in materials and financial advantages of this trend has been the basis for our stock selection in the Craigmillar Energy Fund.
We believe the recent devastation in Japan will not change this decarbonization trend. As energy sources have moved from wood, to coal, to oil , and in the future to natural gas, nuclear and solar, new technologies and processes will present investment opportunities. One of these investments is NLR, a nuclear-based ETF. The portfolio has two ETFs…one is the NLR and the other is the TAN, a solar-based ETF. These two positions make-up around 4% of the overall portfolio. Both of these energy technologies are changing and this is the main reason for having a broad ownership of all technologies (nuclear and solar) as opposed to investing in any one solar or nuclear technology. Since the event in Japan, these two ETF have become uncorrelated over the last three trading days…the TAN is up 12% and the NLR is down -16%. We doubt this will be the continuing case going forward.
