Just a few years ago I had a couple of uranium companies in my portfolio. I was ecstatic when uranium broke through $50. Now priced in the mid $50s, it’s more of a sign that the new nuclear age is in doubt.
Nuclear is being attacked on two fronts. One sprung from the near-meltdown in Japan of the Fukuyama nuclear power plant. The safety of nuclear power is once again being questioned by economists, energy policy makers and scientists.
The other front comes from natural gas. It’s so cheap and plentiful, it makes the construction of nuclear power plants less urgent and less attractive.
But I believe Fukuyama has created a buying opportunity for investors unafraid to go against the grain every now and then. Okay, Germany has sworn off nuclear power. But the vast majority of nuclear power plant construction projects in the planning and blueprint stages will be going ahead.
Natural gas presents quite a different challenge to nuclear. Unless ambushed by the environmentalists, shale gas will give countries a viable alternative to going nuclear. And some countries now leaning toward nuclear may well end up diversifying into gas-powered power plants as well.
But nuclear is not going away. It’s merely taking a breather. From Canada’s Globe & Mail…
What’s just as interesting is what this bidding activity means for the Athabasca Basin uranium plays. Cameco looks cheap at the moment, trading for less than half its 52-week low. Smaller players in the area are also beginning to look tempting.
To be sure, the uranium industry is a two-edged sword for investors at the moment. Cameco and other big producers are still struggling with the aftermath of the Fukushima disaster. Their stock prices reflect the widespread anxiety over nuclear safety and Germany’s high-profile decision to shun atomic energy. On the other hand, investors are starting to make some money in uranium thanks to the spillover effects of the Hathor deal and a slowly growing realization that nuclear energy is still a growth industry, because of strong demand from emerging markets like China.
In this environment, smaller and riskier stocks might be just as attractive as the big stable producers, because junior firms are natural targets for mergers and acquisitions. M&A tends to be contagious and Hathor may signal the start of a wider consolidation drive.
A lot of these Asian joint venture partners are in the business because they’re involved in reactor sales and need to secure a supply of nuclear fuel. Their strategic goals are pretty powerful incentives.
I doubt that drill results in the area will be the proverbial trees falling in an empty forest any more. There will be someone there to hear.
I predict that sentiment against nuclear will slowly dissipate. This would be the perfect time to invest in one or two underpriced uranium producers.
Editor’s Note: Andrew Gordon recently identified three global stocks for the most aggressive income and exciting capital gain plays. You can lock in a 100% risk-free, subscription to his flagship publication Global Wealth Insider for $1 By Clicking Here!
