U308 Stocks: How to Play the Coming Consolidation
Source: Jeb Handwerger, Gold Stock Trades (3/1/11)
"Uranium stocks are pulling back to support and reversing higher."
Market corrections are valuable. Uranium stocks are all pulling back to support and reversing higher. Over the past few months I have highlighted the role nuclear is playing in emerging markets, especially China, Russia, India and South Korea. Even the Middle East, which has vast resources of oil, is looking to expand its nuclear capability. I believe investors will look back at this correction as a great buying opportunity. Acquiring companies may use the next few weeks to make deals as share prices take a breather. Similarly, Fronteer Gold was acquired by Newmont (NEM) specifically during the gold (GLD) consolidation in January. Large companies use profit taking and selloffs to make offers.
All over the world nuclear is being recognized as an integral part of clean energy generation in a developing and expanding world. President Barack Obama has announced more than $8 billion in federal loan guarantees for the first nuclear power plant in the United States in close to 30 years. Obama says investing in nuclear is critical for the United States as it will reduce US dependence on foreign oil, and help the US economy by creating high-wage jobs. The Middle Eastern turmoil is a wake-up call to our elected leaders in Washington who have not been proactive with developing efficient and clean energy sources. One pound of uranium is equal to 20,000 pounds of coal. Despite the Deepwater Horizon and Upper Big Branch, there has not been a push for safer and cleaner nuclear energy.
Unfortunately, the U.S. has been asleep at the switch like Homer Simpson, and the earliest a new reactor will be built is in late 2011. Southern Company has a pending application for a reactor in Georgia, which it says will create 3,000 jobs and generate power for 1.4 million people. However, I believe leaders around the world are realizing nuclear is the only viable choice for clean energy. Obama, who has a large constituency of environmentalist, has given the green light on nuclear. It doesn’t take a high IQ to realize the demand from emerging economies for nuclear power. There are supply concerns, as Russia is not renewing its agreement to supply the US with converted uranium from nuclear weapons. The U.S. must move fast and domestic uranium miners are just beginning their secular bull market trends. I believe we will begin seeing a major consolidation in this sector as many of the larger producers—such as Cameco, Uranium One (UUU.TO) and Paladin—as well as sovereign countries continue to acquire reserves. Look for deals to occur on pullbacks.
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