A Boom in Uranium?

08/19/2015 9:00 am EST

Focus: STOCKS

Nick Hodge

Founder and President, Outsider Club

President Obama's Clean Power Plan makes it clear that the administration wants nuclear to be a key part of the nation's clean energy plans and goals, explains Nick Hodge, editor of Outsider Club.

True greenies hate this. Investors should love it. Either way, but the just announced Clean Power Plan is a nuclear boon.

Indeed, you might have missed the fact that Warren Buffett just took a big stake in a soon-to-be-established Kazakh uranium bank. This is happening at an ever increasing pace.

While coal and oil get no love—and shale loses out big time—this new plan allows states to count new nuclear reactors toward meeting federal emission standards.

That's a big benefit to the five reactors currently under construction in the country: two for Southern Co. (SO), two for SCANA (SCG), and one for Tennessee Valley Authority.

The five reactors are planned to be built by Duke Energy (DUK), NextEra (NEE), which operates Florida Power & Light, and Tennessee Valley.

In addition, there are 17 others planned by a slew of utilities, some of which already have start dates and loan guarantees. It's a nuclear pipeline and it is built now.

Cameco (CCJ) is one of the world's largest uranium players and owner of the largest producing mines. The company raised its 2015 revenue forecast when it reported second quarter.

Instead of the 5% increase previously announced, Cameco is now guiding for a 2015 revenue increase of 5%-10%.

The company also signed a deal in April to supply 7.1 million pounds of uranium to India over the next five years and that company executes on ambitious nuclear plans.

Meanwhile, Argentina, Nigeria, Saudi Arabia, China, South Korea, Vietnam, Poland, the United Arab Emirates, and several other countries have all been signing nuclear development deals.

An imminent uranium supply shortfall has been forecast by everyone from the World Nuclear Association to investment banks to Morningstar. And all this comes at a time when the sector is at an absolute bottom.

As evidenced by the Global X Uranium ETF (URA), which holds Cameco, Denison Mines (DNN), Uranium Energy Corp. (UEC), and several others, the uranium sector has lost 84% of its value over the past five years.

That's insane. It's worse than gold miners, which have lost 77% of their value in the same time frame. But unlike gold, uranium has an industrial use beyond jewelry. And that use is growing.

And you can buy the companies that will supply uranium for future reactors while there's still an 85%-off sale going on.

Japan is restarting its reactors, which could provide a psychological boost to the sector, bringing the sale to an end. Japan couldn't live without it. Neither can the United States. Nor can the rest of the world. Call it like you see it.

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