The Potential 'Rip Your Face Off' Uranium Rally
Just like every election cycle in recent history, America's energy future remains an open and evolving question for the new Trump administration. While the president's cabinet is stacked with gas-and-oil-friendly faces like former Exxon Mobil Corporation (NYSE:XOM) CEO Rex Tillerson and the former Texas governor Rick Perry, "National Investor" editor and founder Chris Temple believes another commodity is set to surge in the next four years.
With Trump, Expect The Unexpected
Temple joined Benzinga's Premarket Prep morning show on Wednesday to talk about his impression of the future of the energy sector and what investors should be on the lookout for as new federal initiatives are announced. His advice? Don't expect the market-wide rally to continue as Trump administration policies begin separating the winners from losers. "Understand that we're going to see more in the way of sector rotation and some internal slug fests among different sectors more than we're going to see the broad market add terribly much to its recent gains."
His other overall tip was to expect the unexpected. As President Donald Trump continues to defy convention, smart investors should try not to rely on old habits and standby investment strategies. "I think we can get out in front of some of these sectors and really take positions in some of them at really attractive levels," Temple said.
Future's So Bright
One key area Temple feels is set to explode is within uranium stocks, which have been mostly stagnant since the 2011 earthquake and tsunami that caused a malfunction in the cooling systems at Fukushima Daiichi Nuclear Power Plant. Temple pointed out that uranium hit a multi-year low of $18/pound late in 2016, and the market is primed for "a potential rip-your-face-off rally before too terribly long."
The reason, Temple said, is that nuclear facilities have been holding back on their supply as the price has continued to drop. "You've got a lot of utilities all around the world that have been playing this game of chicken and not tying up fresh, multi-year supplies of uranium hoping that they can wait until the last minute while the price is low."
Because of this, Temple believes uranium could be in line for a huge rush in volume despite expectations for the more traditional energy stocks.
The American Atom
While nuclear power may seem out of vogue following headline grabbing tragedies like what occurred in Fukushima, Temple explained that it is more common than most realize: "Roughly one fifth of all of our electric power in the United States is generated from nuclear power today. In the last full year that we have statistics for, 2015, U.S. utilities bought 56 million pounds of uranium, less than 4 million pounds of that came from the United States of America."
The critical part in this equation, and why Temple believes uranium is in for a massive rally, is energy independence. Rather than oil or natural gas, uranium is going to be the hot commodity once, Temple said, "the administration realizes we're getting 3.5 or 4 million pounds a year — 5 percent or so of our needs — from U.S. sources, and we're getting almost 40 percent of our uranium from Russia and Kazakhstan and Uzbekistan."
The Nuclear Options
Before leaving, Temple laid out a few tickers investors might want to pay special attention to. He seemed to think most names in the sector had promise, including Cameco Corp (USA) (NYSE:CCJ) and Uranium Energy Corp. (NYSE:UEC). He also mentioned ETF Global X Funds (NYSE:URA) for more general coverage.
Temple's big ticket pick was Energy Fuels Inc (USA) (NYSE:UUUU), which has doubled its value from an all-time low in about two months. He explained: "The company produces just shy of 1 million pounds a year. They have three processing facilities in the U.S. They have the biggest footprint in the U.S. of all domestic companies. And this company, in almost the blink of an eye, can multiply that output by five of six times once demand from utilities and the new orders come."
Overall, Temple's main emphasis was that, based on current prices and trend, uranium stocks are set to react in a big way, saying, "The supply-demand situation, which has been lousy for the last three or four years, is about to flip, and it's going to do it dramatically."
Listen to the full interview with Temple at 16:35 in the clip below.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.