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Jeremy Frommer, CEO of Hedge Fund LIVE Jeremy Frommer has 20 years of industry experience and is currently responsible for general management and leadership of the General Partner. Previously, Mr. Frommer was a Managing Director and Head of the Global Prime Services Group (“GPS”) at RBC... More
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  • Oil, Coal, Uranium – Are they just fueling the fire? Or is there a story to be told?  0 comments
    Mar 17, 2011 9:50 AM | about stocks: DNN, URRE, URG

    HedgeFundLIVE.com

    Although Libya continues to tear itself apart and signs of unrest are spreading to Bahrain and Saudi Arabia, the world has shifted focus to the horrific post-tsunami disaster in Japan. With thousands confirmed dead and thousands more still missing, this natural disaster draws much sympathy from the U.S and its nightmarish experience from Katrina.

    Crude Oil WTI futures have pulled back below the psychological $100 level and is settling around $97-98 with expectations that since much of Japan is no longer at operating capacity, they will not have a high demand for oil. Although these expectations are priced in correctly at this time, many are ignoring two certainties: one, Japan has every intention to rebuild, which infers they will have a need and a demand for oil and other forms of energy in order to reconstruct, two, the news media are not covering the Middle East as stringently as it was a week ago but that does not mean the uprisings and protests have stopped. I strongly believe oil will continue its uptrend and push back past the $100 level in the next 2 weeks.

    Interestingly enough, Japan’s Fukashima plant explosions have caused several Western nations to reconsider their reliance on nuclear energy.  Germany has gone as far as to shut down all nuclear plant operations. Germany is a country where 29% of all its electricity usage is powered by nuclear plants. This explains why the price of electricity soared in European markets and why many uranium miners have plunged. Shares of DNN, URRE, URG have tanked since Monday’s opening bell, accumulating a three day loss of roughly 40% each. I believe the markets are overreacting to the nuclear situation stemming from Japan; many plants have been operating safely for over 50 years. Furthermore, as a global entity, this world has come to rely heavily on nuclear power. 78% of France’s overall consumption of electricity comes from nuclear power plants, 60% for Belgium, and 43% for Sweden. History tells us repeatedly how dangerous nuclear power truly is, with events as heart breaking as Chernobyl and Love Canal. But history also reminds us how much we have come to need nuclear power; we have recovered from these disasters and have learned many lessons. I will contend I am long-term bullish on uranium miners such as DNN, URRE, and URG.

    As investors and traders alike shy away from nuclear energy, we have seen many solar stocks pop in the past few days. But asides from all the noise traders create on the market, one source of energy that never gets old is coal. Coal is likely to see higher demand regardless of what happens to the nuclear power plants. Should nuclear power plants resume operation, coal will be driven by high demand from railroads and transportation. Should other countries follow Germany and cut nuclear operations, coal will see a spike, as electrical generators will need to burn coal to make up for the nuclear powered portion of electricity usage. PVR, a US company that owns and operates coal mines, is my pick for coal’s uptrend. With a healthy 7% dividend and the recent completion of a merger with PVG, I believe we will see PVR trading $28 within a month and a half.

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