Uranium: Go Nuclear in 2015

12/10/2014 9:00 am EST


Brian O'Connell

Chief Investment Strategist, 401(k) Millionaire

You don’t have to be a rocket scientist to have seen some upward trends in the nuclear industry lately; there are several key indicators that point in a bullish direction on nuclear stocks, explains Brian O'Connell in Wealth Daily.

No doubt the global nuclear energy market is growing. So-called green alternatives like wind and solar haven’t made much of a dent in the world’s energy bourses and that’s where nuclear enters the picture.

According to Statista.com, the value of the global nuclear energy market stands at $133 billion right now but is expected to grow to $300 billion in 2015.

But in the past few years, growth has been muted by another high-profile industry event: the Fukushima nuclear disaster in April 2011 that led Japan to close all 48 of its nuclear power plants. The talk was that other countries (like Germany, Italy, and Sweden) would do the same.

But that scenario is changing too and now nuclear is once again at the top of the list for energy options for a burgeoning number of countries, Japan among them.

Consider these recent developments in the nuclear sector, all of which should add to demand for uranium and boost nuclear stocks:

  • Japan has reopened many of its nuclear power plants.
  • The US has announced plans to roll out 13 new nuclear power plants.
  • The UK, France, and Canada have also announced plans to beef up their nuclear energy industries.

One of the earth’s most valuable resources, uranium is the path to profits for investors in one key way: 435 nuclear power plants across the globe rely on uranium to fuel energy development.

All of those plants use about 86,000 tons of uranium annually, but the uranium industry doesn’t really produce that much volume on a yearly basis. Actually, it produces about 75,000 tons of uranium each year.

Further pushing uranium prices upward are ‘shovel in the ground’ projects for 70 new nuclear power plants coming on line globally in the next two or three years.

Which companies offer the best opportunities for atomic energy-minded investors?

For starters, look to Uranium Participation Corp. (TSX:U), which owns a stockpile of several million pounds of uranium.

UPC’s performance is strictly tied to the ebb and flow of uranium prices, making it a no-frills—but potentially ample—upside investment given the current trend of uranium prices.

Another option is Cameco (CCJ), which is currently trading at $18 per share with an upside, analysts estimate, of $23 per share. Cameco is expected to benefit substantially from Japan’s decision to re-ignite its nuclear power industry.

Another option is the Global X Uranium ETF (URA), which tracks 23 worldwide uranium mining companies, most of them in Canada.

This ETF has a small-cap flavor (aside from a 23% position in Cameco), with a 32% weight toward small-cap energy firms and a 31% weight on uranium microcap firms.

The takeaway? Adding nuclear power to your portfolio is no longer a luxury. With industry growth on the front burner, investors should consider going nuclear in 2015.

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