The explosion in uranium mining company stocks this year shows
big investors are choosing the nuclear option again.
Global XUranium (
) -- the No. 1 performing natural resources fund -- spiked nearly
4% Thursday, breaking above its key
200-day moving average
for the first time in 10 months. This could be the early
beginnings of a trend change for this ETF, which crashed 19% last
year and a whopping 60% in 2011 following Japan's nuclear
disaster brought on by the earthquake and tsunami.
URA has rallied 11% year to date vs. 3% for the MSCI World
Index and 2.6% for the natural resources funds. It features the
IBD Accumulation-Distribution Rating
possible on an A-to-E scale of A+, which shows institutional
investors are ravenously hoarding shares.
World's Largest Uranium Miner
The world's largest uranium miner, Cameco (
), accounts for nearly one-fifth of 19-stock portfolio. The
Canadian firm produced 22.4 million pounds of uranium in 2011 and
aims boost output by 60% to 36 million pounds by 2018, according
to Morningstar. TD Securities rated the stock a hold in a
December research note.
TD analysts Greg Barnes and Bonita To wrote: "The election of
a pronuclear government in Japan, the resumption of nuclear plant
approvals in China, the cancellation of several greenfield
uranium mining projects and the termination of the HEU
(Highly-Enriched Uranium) Agreement (between the American and
Russian governments) at the end of 2013 all suggest that uranium
supply and demand should find a new equilibrium over the next
"In the interim, we see the approval of nuclear plant restarts
by the Japanese government as possibly the most significant
positive catalyst for uranium equities and the uranium price.
Whether this will happen in second half of 2013 -- as many expect
-- is open to question, in our view, with the new Japanese
government suggesting that it aims to reach a conclusion on
restarts 'within three years.'"
Cameco management believes Japan could restart five or six
reactors by the end of 2013. Weak uranium prices dampened
production after the Fukushima accident. Cameco lowered its 2018
output target to 36 million pounds from 40 million.
"The recent rebound in the spot uranium price is encouraging,
and we expect the price to remain volatile as the market
continues to find a new equilibrium after Fukushima," Barnes and
To added. "We believe that the uranium market remains reasonably
well supplied and that utility requirements are well covered over
2013-2015. Longer term, we expect a widening supply deficit by
the end of this decade following the cancellation and deferral of
several uranium mining projects -- ultimately, we believe that
this is laying the groundwork for the next bull market for
Uranium Energy To Outperform
Haywood Securities ratedUranium Energy (
), weighted 6% in the portfolio, sector outperform in a December
research report. The Vancouver-headquartered uranium explorer and
mine developer is set to ramp up production in South Texas.
"Uranium Energy became a uranium producing company in November
2010, and we believe that no other new U.S. producer will enter
production until mid-2013, as a result of permitting delays and
construction timelines," Haywood analysts wrote.
Reversion To The Mean?
URA could be a "reversion to the mean" trade, in which a stock
or ETF rebounds simply because it's sold off so much and
outperforms as it catches up with the market in the long run. It
also trades at cheap valuations compared with its benchmark, the
MSCI World Index and natural resources funds. It trades at a
price-to-book ratio of 0.67 and price-to-sales of 0.46. The MSCI
World trades at 1.5 times book and 1 times sales, while the
natural resources trades at 1.65 times book and 1 times
Top 10 Holdings In
) And Portfolio Weighting
1.Cameco Corp. (
2. Paladin Energy Ltd. 14.93%
3. Uranium One Inc. 11.84%
4. UEX Corp. 6.28%
5. UR-Energy Inc. 5.73%
6.Uranium Energy Corp . (
7. Denison Mines Corp. 5.10%
8.Uranerz Energy Corp. (
9. Rockgate Capital Corp. 4.26%
10. Energy Resources Of Australia 4.21%
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