My 3-Part Rationale For Going Long Cameco

| About: Cameco Corporation (CCJ)
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One of the stocks I'll be acquiring this coming week will be Cameco (NYSE:CCJ). Here is the simple, 3-part rationale:

1. Cameco is the world's largest publicly traded uranium producer, with a current market cap in excess of 7.3 billion. For speculators who are already convinced that we are in the midst of a multi-decade transition away from fossil-fuel to nuclear energy -- see my previous article on the transition away from fossil fuels -- Cameco should be on the radar for this reason alone: as the incumbent in a growing market, it has potential to be the safest way to invest in the coming bull market in uranium.

2. Financially, CCJ looks solid: it's P/E ratio is just under 20, which meets my preference of finding stocks with a P/E ratio below the S&P 500 average; the current S&P 500 average P/E is 21.03, so this meets that criteria -- though not by much, so I would prefer to leave some capital available for a drop in price. CCJ also has a dividend yield of 2.10% and a current ratio of 3.35. The dividend yield is appealing for value investors like myself looking for investments especially appealing from the buy and hold perspective, and the current ratio illustrates the company has sufficient assets relative to its debt load.

3. CCJ recently under went some changes in its executive team, as its former CEO, Jerry Grandley, retired in July of 2011 at which point Tim Gitzel was given the job. Gitzel is basically continuing with the same strategy, which I find to be a winning one: CCJ is focused on launching new operations, such as the Cigar Lake Project which is slated to begin production by mid-2013 and has estimated cost per pound of uranium of under $25 (market prices for uranium are currently above $52), and ultimately seeks to double its uranium production to over 40 million pounds of uranium by 2018. CCJ's executive team understands that the demand for uranium is only going to grow as 62 nuclear reactors are already under construction, with China being a serious driver of the market via its plan to propose 120 additional nuclear reactors in addition to the ones already in production. At the same time, the supply of secondary uranium coming into the market from the Highly Enriched Uranium agreement is coming to an end in 2013, which will only increase the pressure on new uranium from mines. All of this suggests higher prices over the long-term, and CCJ's executive team is positioning the firm accordingly.

As for price, CCJ, like pretty much all of the uranium sector, is trading near the bottom of its 52 week range after the massive sell-off following the Fukushima crisis. CCJ is finding strong support at just under $17. With its current price of 18.56 and its 52 week high at 44.81, I think there is a reasonable possibility for share price to double by the end of 2012 -- especially if there is a broad increase of capital flowing into equities this year, which I wholly suspect for macroeconomic reasons.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CCJ over the next 72 hours.