Stocks are off to a good start this year, with the S&P 500 (SPY) up nearly 2%, but it's been an especially strong start for the uranium sector. See my previous post on the subject -- as well as the chart below, which plots a number of high profile uranium stocks and ETFs. The sector as a whole, represented by (URA), is up 26.62%. A notable outperformer in this group is Uranerz (URZ), which is up an astounding 57.68%.
(Click chart to expand)
But for those who missed out, don't worry! Sales are frequent in this sector, and I consider it a reasonable probability that one is coming up.
The catalyst of the potential sale is the upcoming presidential elections in France, set for April 22. Francois Hollande is currently ahead in the polls; he is supported by the Green Party -- a political group with strong anti-nuclear sentiment (in spite of the fact that nuclear is the most dense form of energy, and that density is arguably the key driver of environmental sustainability). As such, Hollande has vowed to close some of France's nuclear power plants, and this point -- a big difference between opposing candidate Nicolas Sarkozy's pro-nuclear stance -- could become a focal swing point in the forthcoming elections. And while Hollande has softened his stance on nuclear, he is also a politician -- which, truth be told, is another way of saying he is a professional liar. At the very least, a victory for him could scare some out of the nuclear market, and could give the Green Party further impetus to demand more nuclear shut downs and greater subsidies of solar and wind energy.
For those invested in nuclear energy on a long-term basis, this represents nothing more than a much welcome potential sale. In light of the known and available technology, nuclear remains the only option of baseload emission-free energy outside of geothermal, which has very little support from serious players capable of pushing the market higher (regardless of how qualified it may be). Meanwhile China, Korea, India, Japan, the United States, and others are still investing in more nuclear power plants. I doubt this will change regardless of what France decides.
And so, a more relevant issue for investors is whether the sale will come before the election -- if this is a buy rumor, sell the news type of trade -- or if it will come after a potential Hollande election. My bias is toward the latter, although given the sharp rise in nuclear and uranium in paticular, I think a correction is likely in the short term regardless. If you're not in already, I recommend getting a small piece at these prices; most uranium stocks are still trading nearly 50% below their pre-Fukushima highs, which I suspect will be surpassed soon enough. For everyone, though, I think it is time to be on the lookout for drops of 10% or more in share prices. Here's a short list of stocks I'll be keeping an eye on:
For the patient investor, I think the best is yet to come in this sector -- and thus sales are opportunities to look forward to.