Energy is vital for every nation in the world -- yet no other
sector gets as much bad press.
According to 2011 statistics from
, oil is the predominant source of energy production around the
world, followed by coal, natural gas, renewables and nuclear. The
energy sector is seeing a revival being led in part by deepwater
drillers and shale oil -- despite the Deepwater Horizon disaster
In the months after that spill, energystocks , particularly
oil, took a hit: The
Energy Select SectorSPDR ETF (
fell 20% between April and July. However, if you had bought in
during that time of crisis, you would've seengains of nearly 63%
in less than ayear when thestock topped $80 the following
I've found a similar situation developing right now in another
energymarket that's been overlooked for years: nuclear power.
After the 2011 disaster at Japan's Fukushima nuclear power
plant, uranium prices fell from more than $70 a pound to $50 in
the span of just a couple months. The entire sector has been
shunned, and ore prices have continued to sink, to a current
level near $34 a pound.
Uranium is due for a comeback, thanks to the most basic tenet
of economic theory -- supply and demand. Nuclear energy
isn't in decline -- it's very much a growth industry. About 13.5%
of the world's energy is produced through nuclear power, with 435
plants currently in operation. Construction is underway on more
than 60 new reactors in 13 countries, with 160 more planned.
The U.S. gets alot of low-enriched uranium from Cold War-era
Soviet missiles. This supply line is set to end at the end of
this year, whichwill remove 24 million pounds of uranium from the
Toput that into perspective, about 175 million pounds are used
each year worldwide in nuclear power generation. Mining companies
provide only about 135 million pounds. That 40
million-pounddeficit is about to grow by 60%, which will almost
certainly cause prices to rise.
The best way to take advantage of this opportunity is through
GlobalX Uranium ETF (
. Thisexchange-traded fund (ETF) holds a number of uranium
Paladin Energy (
Uranium EnergyCorporation (UEC)
Individually, these miners have exceptional risk due to their
limited sizes and low ore prices, making a broad-based ETF a
betteroption . In addition,consolidation may soon come into play,
much like the solar industry is experiencing now. URA is down
about 20% this year, but I see that as a buying opportunity while
the uranium sector is still flying under the radar.
Risks to consider:
Building a nuclear power plant is a capital-intensive
endeavor that can take many years to complete. Delays due tocash
flow problems could result in a slower uranium price
Action to Take -->
Uranium prices are at their lowest point since 2006, but all
indications point to a supply-drivenrally into next year. The
Global X Uranium ETF is currently trading near $15, which looks
like a good entry point considering that its
relative strength (RS)
indicator of 30 is on the cusp of a classic oversold
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