A quick look through my holdings shows that I am heavily invested in technology stocks, with names like Akamai (AKAM), Atheros (ATHR), Apple (AAPL) and Take Two Interactive (TTWO). While thinking of a long term play, which will diversify my portfolio and which has the potential to generate multifold returns, I stumbled upon Uranium Resources (URRE).
To give a little background on the company, Uranium Resources Inc. explores for, develops and mines uranium. It deals in the acquisition, exploration, development, and mining of uranium properties, using the in situ recovery or solution mining process. Its primary customers include utilities who utilize nuclear power to generate electricity.
It is becoming more and more accepted that nuclear power will be omnipresent in a few years, and here's what makes URRE special - the company has reserves of tons of uranium which it acquired at a spot price of about 40 dollars a pound, and the spot price is currently $120/pound. Thats a threefold profit on existing Uranium reserves, while demand for uranium is estimated to get stronger. The huge spread between the price of U308 which they have and the current market price will be a big source of revenue in the future.
According to the company's most recent earnings release on the 9th of August, production more than doubled from the prior year quarter to 136,000 pounds of U308. Added to that, the average cost of production falls below $30 per pound.
The stock has not been doing well in the past month, and has fallen from a high of $10/share on August 9th to $7/share last week. I believe that is a big pullback and I doubled my position at $7. It is currently trading at $8.18 and I believe this is a great long term investment. Also keep in mind that if the dollar goes down, the price of U308 will only rise and will fuel the company's profits and the stock higher.
China disclosed that it plans to build around 50 nuclear reactors in the next 10-20 years, and India has plans to build 10-20 more. Considering the rising costs of energy produced by conventional means, Uranium could very well be the answer to alternative energy proponents, and URRE could be the solution to your search for a long term winner.
However, if you think the stock is too volatile for your investing style, do check out the Nuclear Power Investment Fund launched last month, NLR. This fund trades on the AMEX and could be a diversified play on all nuclear power companies.
Disclosure: Author has a long position in URRE