Commodities Today: News Driving These Stocks

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Includes: CCJ, DNN, KMI, MCPIQ, UEC, URG, WMB, WPZ
by: Matthew Smith

Summary

China continues to overhaul its nuclear industry.

MCP appears set to file for bankruptcy as it will skip a loan payment.

Big pipeline companies are still attractive, with growing payouts and strong balance sheets.

Commodities remain under pressure although WTI Crude remains a bright spot as it tries to take out the $60/barrel level and leave it behind in the rear view mirror. The resistance around the $60/barrel level has been real, and every rally that takes price north of that level quickly dissipates and sees the market walk back prices. It has to be frustrating for investors, but traders who have been playing the oil market have fared far better than those in other markets as we have seen a general decline across the board for all commodities since the US Dollar Index turned higher.

Chart of the Day:

The news continues to get worse for Molycorp (MCP) investors as the rare earth miner is expected to skip a $32.5 million loan payment. Our guess is that this means that the company is preparing to file for bankruptcy protection. This has been a nightmare stock for bulls since the 2011 highs, as the chart below shows.

Source: BigCharts

Commodity prices are as follows (at time of submission):

  • Gold: $1,185.90/ounce, down by $3.90/ounce
  • Silver: $16.645/ounce, down by $0.056/ounce
  • Oil: $59.52/barrel, down by $0.78/barrel
  • RBOB Gas: $2.0477/gallon, down by $0.015/gallon
  • Natural Gas: $2.64/MMbtu, down by $0.002/MMbtu
  • Copper: $2.716/pound, down by $0.012/pound
  • Platinum: $1,106.80/ounce, down by $4.70/ounce

China Nuclear Merger

China continues to make moves to strengthen its nuclear power industry, with its latest move potentially shedding light on its future ambitions of using its large nuclear companies to export technology to other countries. The latest move we refer to is China's decision to merge state-owned State Nuclear Power Technology with China Power Investment Corporation in a deal which some think could lead to a combination of CGN Power and China National Nuclear Corporation, which we highlighted last week due to its big upcoming IPO.

Previously we have said that China's moves in the nuclear industry could be positive for Cameco (NYSE:CCJ), but if China is going to overhaul the entire industry and create national giants that other countries want to do business with, then this could be good news for other companies too, including Ur-Energy (NYSEMKT:URG), Uranium Energy Corporation (NYSEMKT:UEC) and Denison Mines (NYSEMKT:DNN).

Bullish Pipeline Companies

We have received a few questions lately concerning the pipeline companies and whether we were still bullish of the names in the industry. The answer is yes, but right now we think that investors should focus on Kinder Morgan (NYSE:KMI), Williams Companies (NYSE:WMB) and Williams Partners (NYSE:WPZ). We like the big names right now as it minimizes risk to one geographic area of the country and allows investors to benefit from growing dividend payouts and stronger balance sheets. There are some very attractive smaller players out there that investors could purchase right now, but in the current market we would prefer to own companies with pipelines that span the country and serve as interstates rather than the pipeline companies which are essentially spurs or local toll roads.

Bigger is better in low-priced environments and the lower risk profile is key for investors who are also buying smaller E&P names in the current market.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.