I believe that if there was ever a time to be buying these stocks, it is right now. In the coming months, I expect major concerns over nuclear power to fade as they always have in the past after an accident. Warren Buffett just said that "nuclear power is important for the world" at a Berkshire Hathaway (BRK.B) shareholder meeting. Also mentioned in that article is a recent deal where Uranium Energy (UEC) agreed to acquire a privately-held company, Concentric Energy Corp. I expect that with the major drop in valuations, we will see more consolidation in this industry with larger uranium companies buying out the smaller ones.
Already, some countries are planning to get their nuclear power plans back on track. One of the largest markets for new nuclear power plants will be in China, which plans to resume its nuclear plans in just months. As that article states: "But it's only a matter of time until investors snap back to reality and the uranium market begins to rapidly recover. It's at this point that investors recognize the truth: The Fukushima disaster does not fundamentally alter the global demand for uranium oxide."
Even Japan won't abandon nuclear power. A top government official recently said nuclear power will remain a major part of Japan's energy future.
On top of the currently low prices in uranium stocks, there is a major catalyst that could cause uranium prices and stocks like these to soar again: An agreement between the U.S. and Russia whereby the U.S. recycles highly enriched uranium (HEU) from old atomic bombs into uranium that can be used by nuclear power plants. This agreement is scheduled to expire in 2013 and the end of this program would mean there will be significantly less uranium supply on the market. Less supply should result in higher prices, and many industry analysts see uranium prices soaring to $90 or higher in 2013.
Below are some of the stocks that are likely to rebound in the coming months as the negative headlines fade and new plants are built worldwide. With most of these stocks down 35-65% since the crisis in Japan, there are long-term bargains to be had in this sector. Also with the end of the HEU program in 2013 looming, there is a major catalyst that will boost prices and interest in this sector again.
Here, finally, are some stocks to consider:
Denison Mines Corp. (DNN) is trading at $2.23 today. Denison is a uranium mining company, and is based in Canada. The 50-day moving average is $2.67 and the 200-day moving average is $2.58. These shares traded between $1.08 and $4.52 in the past 52 weeks. The book value is $2.20 per share, so these shares are cheap based on that metric as well. Denison has nearly $100 million in cash; other key data is here. Denison is a well-managed company with plenty of upside potential from these levels. At barely over $2 per share, the downside is limited and there should be strong support at the $2 level. Howard Ruff of "The Ruff Times" investment newsletter states: "China is building 60 nuclear plants as this is written. Obama has approved seven nuclear plants.” Lukas Lundin, the chairman of this company, made a significant purchase of 300,000 Denison shares at $2.30 per share a few weeks ago.
Cameco Corporation (CCJ) shares trade at $28.99 per share. Cameco is one of the leading uranium mining companies. The 50-day moving average is $31.71 and the 200-day moving average is $32.92. These shares traded between $20.70 and $44.81 in the past 52 weeks. This company is the largest uranium company in North America. These shares did not drop as much as the smaller companies and it has less risk, but also potentially less reward compared to some of the other companies. This company pays a dividend of 41 cents per share, which is equivalent to a 1.4% yield. The book value is about $13.69 per share. CEO Jerry Grandey said: "In the short-term, we may see delays as the industry pauses to learn the lessons from Fukushima. However, a number of countries have already reaffirmed that building new nuclear reactors is essential to meeting long-term energy demand in their rapidly developing economies." Cameco is a solid way to play the coming rebound in uranium.
Uranium Resources Inc. (URRE) is trading at $1.72 today. Uranium Resources is a uranium mining company. The 50-day moving average is $2.10 and the 200-day moving average is $2.03. These shares traded between 38 cents and $3.98 in the past 52 weeks. Ruff of "The Ruff Times" has positive remarks on this company here.
Uranerz Energy (URZ) shares trade at $2.85 per share. Uranerz is a uranium mining company. The 50-day moving average is $3.40 and the 200-day moving average is $2.97. These shares traded between 87 cents and $5.93 in the past 52 weeks. Management owns a significant stake in this company. Earnings estimates are for a profit of 2 cents per share in 2011 and 32 cents per share for 2012. According to Yahoo Finance, revenues will surge from about $7 million in 2011 to about $42 million in 2012.
Athabasca Uranium (ATURF.PK) is trading for about 20 cents, well off its highs of nearly 50 cents per share. Canada is the Saudi Arabia of uranium and the Athabasca region is the richest region for uranium in Canada. The Athabasca Basin is estimated to hold about 1/3rd of the world's uranium. This company is exploring about 80,000 acres of land in the Athabasca Basin within close proximity to major uranium companies like Denison Mines. An analyst report on Athabasca Uranium can be read here. The tsunami was on March 11, and Athabasca completed private place placement at about 38 cents per share within days of that event in Japan. You can read about the private placement here and here. This gives current investors a chance to buy for about 50% less than the recent private placement price. I believe these shares could easily rise to $1 or more in the next 12-18 months based on the possibility of good news with this company's exploration results and a general rebound in uranium prices and stocks. With a strong balance sheet (just over 10 cents per share in cash) and no long term debt, there is lots of potential here, with limited downside from these levels. You can see the financial data which shows about $4.6 million in cash and no debt in the investor presentation here.
Uranium Energy Corp. (UEC) shares trade at $3.30 per share. Uranium Energy is a uranium mining company. The 50-day moving average is $4.17 and the 200-day moving average is $4.42. These shares traded between $2.11 and $7.48 in the past 52 weeks. Uranium Energy just agreed to acquire Concentric Energy Corp. in a deal valued around $4 million.
UR-Energy, Inc. (URG) shares trade at $1.58 per share. UR-Energy is a uranium mining company. The 50-day moving average is $1.86 and the 200-day moving average is $1.81. These shares traded between 73 cents and $3.37 in the past 52 weeks. The book value is stated at 74 cents. This company has a strong balance sheet with about $35 million in cash and basically no long term debt. According to Yahoo Finance, BlackRock Group Limited owns about 15% of this company.
Paladin Energy Ltd. (PALAF.PK) shares trade for about $3.60. Paladin is a uranium company with projects in Africa and Australia. These shares traded between $2.80 and $5.88 in the past 52 weeks. This company describes itself as "a uranium production company with projects currently in Australia and two operating mines in Africa with a strategy to become a major uranium mining house." David Lennox of Fat Prophets suggests the shares are cheap now.
Uranium U308 currently trades for about $55.50. You can track the price of uranium U308 here.