The world's largest funds or mega funds, managing between $100 billion and over a trillion dollars, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, together control almost a third of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities. In this article, we examine based on our research of their latest available Q3 institutional 13-F filings stocks in the uranium mining group that they are most bullish and bearish about.
Taken together, these mega managers were bearish on the group, cutting a net $230 million in Q3 from their prior $1.97 billion prior quarter holdings in the group. However, taking out Rio Tinto Plc (RIO), which dominates the group and is a diversified miner with uranium being a small portion of their portfolio, mega funds are bullish on the core uranium mining group, adding a net $17 million in Q3 to their $713 million prior quarter position (for more general information on these mega funds, please look at the end of the article).
The following are the uranium mining group companies that mega fund managers are bullish about (see Table):
Cameco Corp. (CCJ): CCJ is a Canadian company that is engaged in the exploration, refining and conversion of uranium in the U.S., Canada and Kazakhstan. Mega funds added a net $24 million in Q3 to their $568 million prior quarter position. The top buyers were Royal Bank of Canada ($51 million) and Goldman Sachs ($14 million), and the top holders were Royal Bank of Canada ($226 million), Barclays Global Investors ($96 million) and Wellington Capital Management ($74 million). CCJ was up a strong 6.7% Tuesday, and it is up almost 20% YTD. It trades at a current 19 P/E on a TTM basis, and at 1.7 P/B, compared to averages of 13.8 and 1.5 for the miscellaneous mining group, while earnings are projected to increase at a modest 5.8% annual rate from $1.25 in 2010 to $1.40 in 2012. CCJ was recently involved in a bidding war with rival Rio Tinto Plc over the acquisition of fellow uranium producer Hathor Exploration, ultimately deciding in late November that it would not out-bid RIO's latest offer, and thereby ceding Hathor to be acquired by RIO.
Denison Mines Corp. (DNN): DNN engages in the exploration, development, mining and milling of uranium primarily in the U.S. and Canada, and also internationally in Mongolia and Zambia. Mega funds added a net $2 million in Q3 to their $13 million prior quarter position, and the top holders are Barclays Global Investors ($4 million) and Goldman Sachs ($4 million). DNN currently incurs losses and trades at a price-to-sales (PSR) ratio of 6.6, and a P/B ratio of 1.2 compared to averages of 7.2 and 1.5 for the miscellaneous mining group. The stock was up over 8.9% today, and is up 37% YTD, after the company announced Monday morning that it expects a 40% year-over-year increase in uranium production this year.
Uranium Energy Corp. (UEC): UEC is engaged in the exploration, acquisition and development of uranium properties in TX, WY, NM, AZ, CO and UT. Mega funds added a net $1 million in Q3 to their $57 million prior quarter position, and the top holders were Oppenheimer Funds ($19 million) and Vanguard Group ($11 million). It currently does not generate any revenue, but on a forward basis, it trades at a PSR of 5.1 based on analyst projected revenues of $54 million in the fiscal year ending July 2013, and at 4.2 P/B. Like many uranium miners, the stock has rallied strongly recently, up almost 20% YTD.
In addition to the above three, mega funds are neutral on Uranium Resources Inc. (URRE), that is engaged in the acquisition, exploration, development and mining of uranium properties. It owns developed and undeveloped uranium properties in South TX, and undeveloped uranium properties in New Mexico. Mega funds hold $10 million of URRE in Q3, unchanged from the prior quarter, and the top holders are Barclays Global Investors ($3 million) and Vanguard Group ($2 million). URRE does not currently generate any revenue, and trades at a price-to-book (P/B) ratio 2.9.
The following are uranium mining group companies that mega fund manager are most bearish about (see Table):
Rio Tinto Plc : RIO is a U.K. based company with global interests in mining. Along with a minor interest in uranium mining, RIO is also engaged in mining for aluminum, borax, copper, gold, iron ore, lead, silver, tin, zinc, titanium, diamonds, talc and zircon. Mega funds cut a net $247 million from their $1.26 billion prior quarter position, with the top sellers being Fidelity Investments ($193 million) and Wellington Capital Management ($91 million). RIO trades at a current 6-7 P/E and 1.7 P/B compared to averages of 13.8 and 1.5 for the miscellaneous mining group.
USEC Inc. (USU): USU supplies low enriched uranium (LEU) to commercial nuclear power plants in the U.S. and internationally. Mega funds cut a net $10 million in Q3 from their $44 million prior quarter position, with the top seller being State Street Corp. ($10 million). USU currently incurs losses and trades, and trades at 0.1 PSR and 0.1 P/B, compared to averages of 2.7 and 0.6 for the alternative energy group.
Uranerz Energy Corp. (URZ): URZ is engaged in the acquisition, exploration and development of uranium properties in the Wyoming Powder River Basin area. Mega funds cut a net $1 million from their $13 million prior quarter position. URZ does not currently generate any revenue, but on a forward basis, it trades at 4.5 PSR based on projected $39 million in revenue for FY 2012, and at 3.6 P/B.
General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.