Uranium Has Gone Parabolic of Late

I have disclosed owning some quirky stuff personally in an effort to reduce the chance that I would ever have an emotional reaction to a decline in the stock market.

I own a few things that I think are really in their own world, including uranium exposure. I own a little bit of Cameco (CCJ) in one of my IRAs and a little bit of the Uranium Participation Corp. in my wife's Roth.

Uranium has gone parabolic of late, CCJ is up about 15% in a week and U.TO is up something similar in the same time period. Uranium is capable of very big moves. I don't own these for clients because they are very volatile. I have owned CCJ for quite a while, and in that time I have been up lot, then down and then up again. Joellyn has only had U.TO since January, so it has only gone up.

I do not have any great feel for what comes next, so I have stop order in on CCJ, which is very tight to the market. If I get stopped out, it will cut my exposure by about 2/3.

The long term case for uranium is compelling and as has come up here before big increases in the spot price really doesn't have a big impact on the cost of nuclear power. But for the short term, I just don't know so I have the stop order. I will move it up every day if the stock keeps moving up.

There are two points to this post. One is that it is OK to not have all the answers all the time. But just because you don't have all the answers, doesn't not mean you should not have some sort of plan of action if market action so dictates. The other point is that if you have any exposure to the space you might want to think about some sort of exit strategy or pairing back.

Just a thought.

Full Disclosure: Author is long Cameco.

Comments

[nmerrill:]

I am in the same enviable position of riding uranium prices, however I too have no idea how to guage the top. With the drivers seeming to be a simple supply and future demand issue, its hard to see any reason to get out. In fact in thinking about doubling my position. Any ideas?

2007 Apr 09 01:02 PM

[Roger Nusbaum:]

as a matter of philosophy i try to be very aware of position size relative to the entire portfolio, I have grown into a slightly larger position in uranium which is OK but I will not be doubling up CCJ or U.TO. If doubling up takes a portfolio to 10% or more that introduces a lot of volatility, more than I want so I am not doing that trade. you need to decide for yourself if you want that type of octane in your account.

2007 Apr 09 05:58 PM

[Quaker:]

I agree. I bought USU at 11, hoping to do 10% a year. It's 19. What took this stock to 11 is ever bit as weird as what took it to 19. All I know, is that the capital requirements for Uranium mining are considerable. Also, we tend to think there's a limit to the worlds oil and gas but unlimited Uranium.

2007 Apr 09 02:09 PM

[Roger Nusbaum:]

does USU do enough mining to think of it that way? I thought almost all of its uranium came from old weapons? do i have that wrong?

I looked at USU a long while back and it seems a little more difficult to really get a hold of, also it lagged so badly for so long (this goes back a little while I realize) that I wonder if the market was saying something about it? Is it a bad house in a great neighborhood?

I really don't know but would welcome being set straight on this.

2007 Apr 09 06:02 PM

[Randy Britton:]

From what I have read, USU (U.S.E.C.) United States Enrichment Company, does no mining. It supplies 30% of the WORLD'S enriched uranium. Non-enriched uranium is of no value to a power plant. The price of uranium was low when demand was low & supply was high. World demand is currently double of the supply available. Usu is the only mansion in town! Randy B.

2007 Apr 09 11:37 PM