By Justin Spittler, editor, Casey Daily Dispatch
Cameco just shocked the world.
Cameco is the world’s biggest uranium producer. Two weeks ago, it suspended production at its flagship McArthur River Mine and Key Lake Mill complex for 10 months.
This is a huge deal. It could even be the catalyst that ignites the next monster rally in uranium stocks.
Cameco’s McArthur River Mine and Key Lake Mill complex is the world’s biggest uranium operation. It accounts for 10% of the world’s uranium supply.
So, this decision should lead to a much tighter uranium supply. That’s good news for the price of uranium and uranium stocks.
• That’s why Cameco’s stock jumped 5% on the announcement…
It’s also why we saw a huge rally in other uranium stocks.
The Global X Uranium ETF (URA), which invests in 21 uranium miners, jumped 8% on the news. A few junior uranium miners spiked more than 20%.
Those are enormous short-term gains. But they’re just a taste of what’s to come.
I’ll explain why in a minute. I’ll also show you the safest way to bet on uranium.
But let me first tell you why there’s so much upside in uranium stocks.
• The uranium market has been an absolute bloodbath…
The price of uranium fell 85% between 2007 and 2016. Many uranium stocks fell 90% or more.
When stocks fall that much, most investors throw in the towel. They move on to hotter sectors.
But at Casey Research, we love a good crisis.
That’s because a crisis allows you to buy world-class companies at huge discounts. Sometimes, you can even buy great companies for pennies on the dollar.
• Of course, cheap stocks are usually cheap for a reason…
And in this case, a massive surplus has kept the price of uranium and uranium stocks from rising.
That’s why Cameco’s decision is such a game changer. It’s exactly what the uranium market needed.
I’m not the only who thinks so, either.
Uranium Energy Corp. (UEC), another major uranium miner, recently called Cameco’s decision “the biggest catalyst for the uranium sector since Fukushima.”
That’s because it could take 15 million pounds of uranium off the global market.
But let’s be real.
• The uranium market isn’t out of the weeds yet…
You see, the industry could still be oversupplied by as much as 5 million tonnes next year. That’s not good news.
But you need to understand something about markets. They price in news long before you read about it in The Wall Street Journal or Barron’s.
In other words, you want to buy when there’s blood in the streets.
The trick is knowing when a market’s about to get a little less bloody. If you can get that right, you can make enormous amounts of money in almost no time.
And it looks like the uranium market is getting close to its turning point.
Just look at this chart of URA.
You can see that URA was in free fall from 2011 through 2015. But it stopped falling in early 2016.
Since then, it’s been “carving out a bottom.”
This is bullish for uranium stocks. You see, stocks often carve out bottoms before beginning new uptrends.
• That said, you should never buy stocks just because they carved a bottom…
There also needs to be a reason why those stocks will head higher. And we have that with uranium stocks.
The price of uranium is irrationally low. It’s well below the industry cost of production. This means uranium miners are losing money on every pound of uranium they dig out of the ground.
This is clearly not sustainable.
Soon, other uranium miners will follow Cameco’s lead. They’ll cut production too. When that happens, the supply of uranium will get even tighter.
That will lift the price of uranium…and send beaten-down uranium stocks soaring.
• So, consider speculating on uranium stocks if you haven’t already…
The safest way to do this is with URA. It allows you to bet on a basket of uranium stocks, which is less risky than buying individual stocks.
Just understand that uranium stocks are extremely volatile.
Blue-chip uranium stocks like Cameco can swing 5% or more in day. Junior uranium stocks can move 20% or more.
If you can’t handle that volatility, you should stay on the sidelines. If you’re willing to speculate, don’t bet more money than you can afford to lose. Use stop losses. And take profits when you get them.
November 17, 2017
If you’ve invested in uranium stocks before, let us know how it went right here. If not, let us know if you’re planning on betting on them. We’d love to hear from you.