An investor's job is to find the hot sectors before they become cold again. Right now, nuclear energy is red hot (pardon the pun). In February 2010, President Obama approved $8.3 billion in loan guarantees to build the first nuclear power plant in more than 30 years. This money is allocated to help Southern Company build two reactors in the state of Georgia. These reactors are estimated to be in full service by 2016 and 2017. U.S. Energy secretary Steven Chu said that his department plans on offering loan guarantees to at least six more projects but declined to present a timeline. In addition, China has 28 nuclear power plants under construction. This is not to mention all the additional activity around the globe. Despite its drawbacks, nuclear energy remains the most efficient and carbon-free power source available.
What is the one unifying factor of all the nuclear power plants worldwide? It is that they require uranium as a core fuel component. This demand has pushed the spot price of uranium oxide to more than $60 per pound recently. To put things in perspective, one pound of uranium can generate as much power as 20,000 pounds of coal and there is no carbon discharge to harm the environment.
So how can you, as a stock trader benefit from this surging demand? Uranium mining stocks. While there are obviously several uranium stocks to choose from, Uranium Resources Inc. (Nasdaq: URRE) is a small-cap mining stock that has recently been surging upward. It has catapulted from under a $1 per share to nearly $3.50 per share in the last 12 weeks. To top it off, this stock was trading at a high of $13.67 per share back in 2007.
Technically, price is well above the 20 day Simple Moving Average of $2.39 per share. In fact, price has broken above the upper Bollinger Band on the daily chart, indicating severe overbought conditions, signaling an imminent pullback. Wise investors will wait for the pullback before considering buying URRE. However, the economic and political climate makes this stock look like an excellent long term hold.
Disclosure: no positions