Uranium Stocks' Rebound Mirrors Dramatic Drop

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"The current situation is a buying opportunity for uranium producers."

As the nuclear emergency in Japan shows signs of stabilizing, stocks of uranium companies that mine the radioactive material have regained some lost ground. Still, it may be some time before spooked investors embrace the sector again.

Reaction to the partial meltdown at Japan's Fukushima Daiichi plant was swift and unforgiving. Shares of several uranium companies trading in the United States and Canada plummeted by double digits from March 10, the day before Japan was struck by a 9.0-magnitude earthquake, to low points last week.

Uranium stocks bounced back as the situation at the Fukushima nuclear plant turned more optimistic.

"We continue to believe that the nuclear renaissance is real and that it continues, but we suspect that the equity market's belief in this renaissance is likely to be suspended for the next year or two," wrote Salman Partners Analyst Raymond Goldie in an investment note.

Prices of uranium stumbled 26% in a one-week period to $49.75 per pound on March 17, and then recovered to $62 this week, near the pre-Fukushima level of $67.50, according to data from FactSet Research.

Encompass Fund Manager Malcolm Gissen said that his fund sees the current situation as a buying opportunity for uranium producers.

For many uranium companies, "we think they offer a very good buy because we see higher uranium prices ahead," Gissen said.

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