Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Profit from the New 'Green' Nuclear Age

By

It's much safer and more reliable -- and will continue to grow.

PrintPRINT
For nearly two years, the nuclear industry has had a mushroom cloud hanging over its head. As Germany and a number of other European governments began discussions about abandoning nuclear power in the wake of the Fukushima Daiichi disaster, investors have been leery of anything even remotely related to nuclear power.

A nuclear renaissance is unfolding in the emerging world as China, Russia, and other nations continue building reactors at a rapid clip, because of their low emissions and reliable, long-term operation. Uranium miners represent the purest exposure to this growing demand in nuclear energy.

Miners have been under severe pressure recently, as cheap natural gas in the US has made gas-fueled electricity generation more attractive. Global uranium demand also has dipped slightly due to the shutdown of eight German reactors. That's led several major research firms to downgrade uranium miners, including Cameco (NYSE:CCJ). However, downgrades of Cameco are shortsighted.

Driving the negative sentiment are low uranium prices, which are off by more than 60% since their highs of four years ago. This weak price environment has pushed several smaller miners out of the market, because their production wasn't economical at current price levels.

Cameco is the largest and lowest-cost uranium producer in the world, on track to produce 36 million pounds by 2018. It will be helped towards that production goal when operations commence at its Cigar Lake joint venture in Saskatchewan, Canada, one of the richest sources of uranium in North America.

While Cameco has been shouldered with a low selling price for its ore over the past two years, it should see higher prices in the future, as long-term supply contracts expire and the company renegotiates them at more favorable terms.

I expect uranium prices to rise over the near term, because production is currently running at a 40 million pound deficit to demand. That deficit has been made up by dipping into existing stocks and using uranium from dismantled nuclear warheads. But uranium demand should begin taking off over the next two years as new reactors come online.

In particular, Cameco will benefit from surging Chinese demand for uranium. The company is the primary supplier of the country's ore, under a contract that runs through 2025.

Although uranium demand has been relatively weak over the past year, Cameco has managed to grow its revenue by nearly 12% while maintaining a net margin of 21%, thanks to its low-cost operations. The company also carries very little debt and has grown its dividend by more than 15% over the past five years.

Cameco's shares will likely remain volatile over the short term because of analyst pessimism, but it faces extremely attractive long-term prospects. Take advantage of the stock's current weakness and buy Cameco.

Editor's Note: This article was written by Benjamin Shepherd of Global Investment Strategist.

Below, find some more great investing and trading content from MoneyShow:

A Bright Future for Natural Gas

One Metal to Rule Them All


An Energy Trend That Runs Deep

Twitter: @TopProsTopPicks
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT

Busy? Subscribe to our free newsletter!

Submit
 

WHAT'S POPULAR IN THE VILLE