Due to concerns about global warming, many prominent environmentalists who once protested nuclear plants now speak in favor of nuclear energy as a “green” source of electricity, asserts John Persinos, contributing editor at Investing Daily's Personal Finance.
My own personal evolution is instructive. As a long-haired member of the no-nukes movement in college, I ardently protested nuclear power in the 1970s. Fast forward 40 years and I now embrace nuclear, as a cleaner alternative to fossil fuels. (The story of humankind is a story of endless ironies.)
The search for low-carbon energy is one of the most important long-term investment trends of our time. For all the fuss raised by anti-nuclear activists, the fact remains that nuclear power is a lot cleaner on a day-to-day basis than oil or coal. Nuclear power has gotten considerably safer over the years and it doesn’t emit the gasses that contribute to global warming.
The demand for uranium should remain strong in coming years. The one company that’s best positioned to profit is the little-known Canadian firm Cameco Corp. (CCJ), the largest and lowest-cost uranium producer in the world.
The U.S. and most other countries import the vast majority of the uranium they use as fuel. With emerging markets stepping up plans to build nuclear power plants, a bull market in uranium is unfolding that will extend over many years. The price of uranium skyrocketed in recent months to its highest level since 2015.
You may be surprised to learn that nuclear is the world’s second-largest low-carbon power source. Nuclear power supplies about 10% of the electricity generated worldwide. The largest low-carbon power source is hydroelectric.
The international climate change accords in Paris, which the Biden administration this year rejoined, endorsed nuclear as a way to reduce carbon emissions. President Biden’s $1.2 trillion infrastructure bill proposes to revive the nuclear power industry, which provides about 19% of the nation’s electricity.
Cameco owns the production and exploration rights to about 1.9 million acres of land, mostly in Northern Saskatchewan. Canada is the world’s second-largest uranium-producing nation, behind Kazakhstan.
Cameco sits on about 460 million pounds in proven and probable reserves of uranium and an additional 600 million pounds in measured and indicated and inferred resources. Cameco produced about five million pounds of uranium in 2020.
The company also is a leading provider of nuclear fuel processing services, supplying much of the world’s reactor fleet. With a market cap of $9 billion, Cameco is in fact the world’s largest publicly traded uranium company.
Cameco’s status as a “mid-cap” stock puts it in the sweet spot for growth. It’s large enough to withstand economic ups and downs, but it’s small enough to confer outsized growth.
China continues to make a big bet on nuclear, in large part to wean itself away from coal and mitigate a horrendous air pollution problem that’s becoming a safety as well as political crisis. The country has 26 nuclear power reactors in operation and 25 under construction, with nearly 100 on the drawing boards for 2030.
Cameco will benefit from soaring Chinese demand for uranium. The company is the primary supplier of the country’s yellow cake” (uranium concentrate powder) under a contract that runs through 2025. India’s aggressive pursuit of nuclear power also will boost demand for the company's uranium.
The company employs a conservative marketing strategy, selling around 40% of its production under long-term contracts at fixed prices that provide a cushion when uranium prices are low.
Cameco is a play on unstoppable energy mega-trends. The average analyst expectation is for Cameco to generate year-over-year earnings growth of 83.3% in the current quarter, 111.10% in the next quarter, 50% in the current year, and 144.4% next year.
Indeed, prices for a wide range of commodities are surging and should continue their upward trajectory, as global growth and the push for green energy accelerate.