Why Nuclear Energy Stocks Will Soar in 2017
You don’t have to be a rocket scientist to have seen some upward trends in the nuclear industry lately.
There are several key indicators that point in a bullish direction on nuclear stocks, and all are worth examining before adding any uranium-themed investments to your portfolio.
No doubt the global nuclear energy market is growing. While renewables, such as solar and wind have started to make a serious contribution to our overall enrgy economy, nuclear continues to serve as the backbone.
By 2030, the nuclear power generation market is expected to be worth about $300 billion. And that's just generation. That $300 billion doesn't inlcude radiation management, plant construction, service, front end of fuel cycle and spent nulcear fuel reprocessing. Combined, you're looking at a total market valuation of about $677 billion.
Now while nuclear power growth in the U.S. is virtually no-existent, in other parts of the world, it continues to grow dramatically. In fact, right now there is a very real boom in nuclear power development. China, South Korea, India, Saudi Arabia — all across the globe, there are nearly 200 planned reactors under construction or in early development stages.
Sure, Fukushima is still a very clear memory for many. But the fact is, the Fukushima disaster was not a crisis because the process of nuclear power generation is inherently unsafe — it was a crisis because of human error. Lax policies, sub-par safety procedures, and poor logistical planning were to blame, not the splitting of isotopes. And the folks who make the big decisions regarding energy development know this. Thus, the build-out of nuclear power generation continues.
Boosting Nuclear Stocks
With continued and steady interest in nuclear energy, the stocks to watch right now have a uranium bent.
One of the earth’s most valuable resources, uranium is the path to profits for investors in one key way: 435 nuclear power plants across the globe rely on uranium to fuel energy development.
All of those plants use about 86,000 tons of uranium annually, but the uranium industry doesn’t really produce that much volume on a yearly basis. Actually, it produces about 75,000 tons of uranium each year.
That’s money from heaven for uranium stocks and funds, as the price for valuable uranium goes up when demand spikes.
“There are a few key factors that are making traders believe that prices should be going up, this includes the good news of Japanese reactor restarts,” said Jonathan Hinze, a senior vice president at Roswell, GA-based Ux. “Expectations that demand will grow even stronger due to China” should also drive uranium prices upward.
70 Nuclear Power Plants
Further pushing uranium prices upward are “shovel in the ground” projects for 70 new nuclear power plants coming online globally in the next two or three years. Some analysts predict uranium prices will steadily rise to new highs in excess of $70 by 2018.
Which companies offer the best opportunities for atomic energy-minded investors?
For starters, look to Uranium Participation Corp (TSX: U), which owns a stockpile of several million pounds of uranium. UPC’s performance is strictly tied to the ebb and flow of uranium prices, making it a no-frills but potentially ample upside investment given the current trend of uranium prices.
Another option is Cameco (NYSE: CCJ), which is expected to benefit substantially from Japan’s decision to re-ignite its nuclear power industry.
According to Morningstar, Cameco is the world's largest publicly traded uranium miner with high growth prospects. “We expect annual output, which was 23.6 million pounds in 2013, to rise roughly 50% through 2019,” the firm says in a recent research note. “Cameco’s new volume will be low cost, with the majority coming from one of the highest-grade deposits in the world.”
Morningstar also notes that uranium consumption is “set to grow at the highest pace in decades as emerging economies turn to nuclear as a carbon-light source of base-load power. Meanwhile, as decades-old existing stockpiles of uranium are whittled down, we expect to see increased pressure on mined supply to meet that growing demand.”
Another option is the Global X Uranium ETF (NYSE: URA), which tracks 23 worldwide uranium mining companies, most of them in Canada. This ETF has a small-cap flavor (aside from a 23% position in Cameco), with a 32% weight toward small-cap energy firms and a 31% weight on uranium microcap firms.
The takeaway? Adding nuclear power to your portfolio is no longer a luxury. With industry growth on the front burner, going nuclear in 2017 — especially with uranium mining companies — is a necessity.