A Neglected Energy Behemoth Is Waking Up
Listen to this post
Name the best-performing fuel commodity of 2023.
Oil, right? That’s the answer you might give after reading Sunday’s Daily, where I stuck my neck out and said oil will be the best-performing commodity over the longer term.
And oil has been hot. Crude futures are up about 12% so far this year. But it’s not the best. And looking outside of oil, it gets ugly…
Natural gas is down 45% this year. Coal? Down 45%.
So… what is it?
Don’t worry, I won’t fault you for overlooking the one fuel that’s run 40% higher this year. World leaders have been ignoring it — really, rejecting it — for over a decade. And some people think world leaders are pretty smart.
Yet, like a hungry grizzly bear slouching bleary-eyed into the first cool morning of spring, this energy fuel is waking up from a long hibernation. And the other forest creatures are taking notice.
You may not like it, but the answer is uranium — the lifeblood of nuclear energy.
Here’s how uranium prices (blue) stack up against oil (light blue), natural gas (orange), and coal (yellow) year-to-date.
Uranium has broken from the pack, especially in the last couple months as the hottest summer on record is forcing policymakers to reconsider nuclear power as a future green energy source.
But let’s look at the long-term chart of uranium for a bit of necessary historical context.
Uranium prices have languished for 16 years, ever since the 2008 financial crisis clamped a lid on that decade’s huge commodities boom. Then, the 2011 Fukushima nuclear plant meltdown tarnished the political climate for commercial atomic power.
Ever since, countries have been shutting down their nuclear plants — a move that, in hindsight, may have been a colossal mistake.
With Russia’s war with Ukraine cutting off oil supplies, and the Israel-Palestine conflict threatening to further crimp the global energy trade, speculators again see nuclear energy as a key to any renewable energy future. And new nuclear plants are slowly coming online in the United States and elsewhere.
That’s because despite its bad PR, nuclear is the highest capacity, most efficient, and safest energy source we have. It must have a place in the future energy mix if we’re ever going to wean off fossil fuels.
Whether you’re down with this or not, you can’t deny investor appetite for nuclear energy stocks is on the rise. Momentum is strong. And it’s not too late to get in.
Let’s lay out all the facts today, and zero in on the best nuclear fuel names to add to a energy portfolio…
Nuclear: Safer than Wind TurbinesNuclear power is the energy sector’s boogeyman — the most-misunderstood storyline in the commodity world.
And it’s earned this status for just three notable safety incidents throughout history:
- Three Mile Island in Pennsylvania back in 1979, which proved as dangerous to public health as a chest x-ray.
- Russia’s Chernobyl, in 1986, a true disaster that killed dozens of workers and first responders immediately, then thousands later from adverse health effects, as a result of a flawed reactor design and poorly trained personnel.
- And the forementioned Fukushima in Japan, which melted down as a result of a one-two punch of earthquake and tsunami, causing one cancer-related fatality and dozens of injuries.
Of the three, Chernobyl was hands-down the worst. It did lasting damage to the surrounding environment. It had a massive human toll — to people who directly dealt with the meltdown, and to the thousands in the surrounding area who were exposed and displaced by the accident.
But it also happened nearly 40 years ago. It’s been tirelessly documented as a consequence of poor design and maintenance. It’s taught us everything we need to know about the wrong way to generate nuclear power.
I bring this up first because safety is the primary concern people seem to have about nuclear power. The problem is, that fear doesn’t match up with the data.
This chart, from Our World in Data, shows us just how safe nuclear energy really is…
Combined, coal energy production kills an average of 29 people per unit. Oil kills 18. These numbers aren’t really surprising, but the next few are.
Biomass, natural gas, hydropower, and even wind power kill measurably more people than nuclear energy, at 0.03 deaths per unit. Solar is the only safer technology.
And this speaks just as much to nuclear’s efficiency as it does to its safety.
When it comes to energy production, nuclear power is about as efficient as it gets. A typical nuclear reactor produces one gigawatt of electricity per year with almost zero carbon emissions. At the same time, it requires 0.05% of the land that wind farms consume, or 0.25% of the land required for a solar panel field.
The energy produced by nuclear tech simply requires far fewer workers in far fewer dangerous situations. That’s why its death toll is so relatively low.
I’m not going to get into the weeds about how nuclear power is generated — that’s not relevant to the investment case we’re making here today.
But I will show you what the TradeSmith toolkit knows about nuclear energy stocks…
Three Nuclear Stocks to WatchETFs are available for just about any investment theme you want to follow these days. And that’s just as true in this case.
But let’s jump right into some specific, well-known stocks, and see how the best ones rank in TradeSmith’s Ratings software…
1. Uranium Energy Corp. (UEC) | $2B Market Cap | +39% YTD
Uranium Energy Corp is chiefly a uranium miner and processor operating in the U.S., Canada, and Paraguay.
The mining sector is notoriously volatile and subject to “lumpy” revenue, so expect a bit more risk with this one.
TradeSmith’s Ratings gauge seems to indicate the risk-reward ratio is dead center…
While indicating a Sky High level of risk on its Volatility Quotient (VQ)…
That tells me UEC is one you definitely don’t want to bet the farm on — and may not want to own at all.
But its volatile nature could make it a great trade candidate — if you’ve got the stomach for it.
2. NEXGEN Energy (NXE) | $2.7B Market Cap | +31% YTD
Nexgen is a Canadian early-stage exploration and development company, focused on acquiring and developing uranium properties north of the border.
Its Rating gets a Strong Bullish 64…
And it offers somewhat lower risk (than UEC) on its VQ…
Again, this is a smaller-cap company focused on mining the resource itself. Volatility tends to come with the territory.
But the trend and volatility on NXE is much healthier, making it a nice small-cap buy in the space.
3. Cameco Corp (CCJ) | $15.6B Market Cap | +65% YTD
Canada-based Cameco is the world’s largest publicly traded uranium company, accounting for 9% of global uranium production in 2019. If you’re looking for a “blue chip” nuclear energy stock, CCJ is about as good as it gets.
The Ratings gauge seems to agree, giving it the highest Strong Bullish rating of the three…
The stock, while still being quite volatile, offers the lowest VQ of the three we discussed today…
That makes CCJ one of the safer buys in the nuclear energy space. It also offers a 0.24% dividend (shoutout to Lucas Downey’s excellent piece on the subject yesterday) that it’s been issuing and raising since 2001. That’s a mark of stability and safety just as much as it is a draw for income-hungry investors.
I hope these three stocks give you a strong starting point for your search.
The nuclear energy trend is only getting started, and placing the right bets now could pay off handsomely in the years to come.
And if you haven’t been already, make sure you’re using Ratings by TradeSmith as part of your TradeSmith Platinum membership.
It’s available right in your TradeSmith Finance dashboard, sitting alongside any ticker you look up.
Make a habit of checking that gauge — along with all the other metrics and strategies you have access to — before you make a single investment decision.