Critical Power Shortage Sets These 2 Stocks Up for Profits

I spent some time on the Benzinga “Live Trading” show with Ryan Faloona and the crew last week talking about uranium stocks. Nuclear energy is attracting a lot of attention, including more than its share from traders.

As a long-term investor and research-driven analyst, I might not be much help to traders, but I think I can help investors. I have been an unabashed bull on nuclear energy and uranium for some time, and I have gotten to know the market pretty well.

Right now, there are 436 operational reactors worldwide and 173 more under construction.

That is not going to be enough in the long run.

It has always been clear to me the path to a zero-emission future is to go from natural gas to nuclear and renewable. Wind and solar were never going to be enough to meet the world’s rising energy demand. No matter how you feel about climate change, developing renewable, clean resources is just smart.

The brain-dead politicians, misguided activists and instant experts around the world will eventually have to accept that you cannot go green without nuclear energy unless you are willing to reduce the standard of living of almost every single person on the planet.

Expanding the usage of nuclear energy is not a choice. It is a must to power the future.

We are going to need a lot of uranium.

The Uranium Landscape: Global uranium production has consistently lagged behind demand, creating a significant deficit that is expected to persist.  Financial buyers like hedge funds and ETFs have also been buying uranium, further reducing the supply.

Geopolitical factors are further shaping the uranium market landscape. The Russia-Ukraine conflict has disrupted supply chains, particularly for European utilities dependent on Russian uranium. This situation has highlighted the importance of diversifying uranium sources and has led to increased interest in secure, stable supplies from other regions. As a result, producers outside of Russia may see increased demand for their uranium resources.

Uranium Investment Ideas: Given these market dynamics, here are two solid investment options to consider.

Cameco Corp. CCJ stands out as a leading player in the uranium market and is well-positioned to benefit from the industry’s growth. 

The strong demand for uranium aligns well with Cameco’s production capabilities. The company’s strategic assets, including high-grade uranium mines, ensure cost-effective production. Favorable market dynamics support higher uranium prices, benefiting Cameco’s bottom line. The company’s long-term contracts and strategic partnerships provide revenue stability. Cameco’s solid financial health and positive investor sentiment contribute to its growth potential.

Keep in mind that Cameco is a twin momentum stock. The shares are attracting institutional attention because sales and earnings are rising rapidly. Analysts are scrambling to raise their earnings estimate for the company and urging their institutional customers to buy the stock.

If the fundamentals drive the price higher, you can hold the stock for a long ride. Do not play guessing games if it slows down or there is significant selling pressure. 

Exit the stock and wait for the momentum to reassert itself.

Sprott Physical Uranium Trust SRUUF offers a unique way to gain direct exposure to physical uranium. It provides direct exposure to uranium without the operational risks associated with mining stocks. The trust benefits from rising global demand for uranium and nuclear energy. It acts as a potential hedge against inflation. 

I have owned this for years and have no intention of selling it anytime soon.

While the uranium market offers opportunities, it is crucial to approach certain investments with caution.

Despite its innovative small modular reactor technology, NuScale Power Corp SMR faces significant challenges. Project delays and cost overruns have eroded investor confidence.

Regulatory and safety hurdles pose ongoing challenges for the company. NuScale’s financial instability and high cash burn rate raise concerns about its long-term viability. 

The company faces competitive disadvantages against other renewable energy sources. 

Companies developing uranium projects without current sales or profitability carry substantial risks. The highly speculative nature of these stocks leads to extreme price volatility. Their lack of revenue and profitability creates a dependency on external financing. These companies face significant operational and execution risks, especially those without proven track records. Regulatory and political risks can impact project viability for uranium story stocks. Market sentiment-driven price fluctuations can result in significant losses for investors.

The uranium market presents a compelling opportunity for investors, driven by increasing global demand for nuclear energy and supply constraints. Cameco Corporation and the Sprott Physical Uranium Trust offer solid options for gaining exposure to this growing market. 

Avoiding the empty shell story stocks with no hopes of profits for at least a decade is crucial. 

Photo by metamorworks via Shutterstock.