October has been a rotten month for pretty much every sector, including uranium. However, this October spill in uranium stocks might be presenting investors with a tremendous buying opportunity just as the sector enters its strongest months of the year historically (November/December).
URA (Daily – Year To Date)
After trading up near $14 in early October uranium sector exchange-traded fund URA has dropped more than 12%, in unison with broader equity market indices.
Uranium sector keystone stock Cameco (TSX:CCO, NYSE:CCJ), which has always been the way that institutional investors have piled into and out of the uranium sector, has exhibited a strong seasonal tendency to perform well in the final two months of the year:
Over the last 20 years Cameco has risen an average of ~10% during November/December – this is a very strong seasonal pattern any way you slice it. While the URA has only been around since 2010, this uranium sector ETF also exhibits a strong bullish seasonal pattern during November/December each year with an average gain of 5%:
With one week left in October this opportunity to pick up uranium shares near long term support before the sector benefits from seasonal tailwinds might be the fat-pitch setup that many investors have been waiting for.
One can either simply use the URA as a proxy for the entire sector or one can look into individual uranium shares. Here is a trio of my favorite uranium stocks (I own shares in all of them) in market cap order from largest to smallest:
NexGen Energy (TSX:NXE, NYSE:NXE): NexGen is the top-tier exploration/development stock in the uranium space. Boasting its Arrow Deposit in the Athabasca Basin as a world class project both in terms of size and grade. In my estimation NXE’s current C$850 million market cap could easily be 3-4x its current level in a normalized uranium price environment. Owning NXE is a bet on higher uranium prices, but it also offers the cushion of being long a world class asset that will be brought into production one way or another.
Skyharbour Resources (TSX-V:SYH): Skyharbour has a modest C$26 million market cap and boasts a strong management & geological team with a track record of success. SYH has a handful of uranium exploration projects in the Athabasca Basin (#1 jurisdiction for uranium exploration in the world) including its flagship Moore Project. Skyharbour has strong insider/mangement/institutional ownership which totals more than 40% of the shares outstanding. This is a discovery driven company that is poised to perform well during a uranium renaissance.
Anfield Energy (TSX-V:AEC): Anfield has a tiny C$14 million market cap which matches the early stages of many of its uranium exploration projects in Arizona, Utah, and Wyoming. AEC is a speculative high risk/high reward play on uranium exploration/mining in the United States. U.S. uranium has taken on a greater level of importance since the Commerce Department under the Trump Administration moved forward with a section 232 investigation into uranium imports. It is not an overstatement to say that U.S. uranium production has been soft and getting softer during the recent bear market in the uranium space. Uranium powers 99 U.S. commercial nuclear reactors that produce 20% of the electricity for the U.S. electric grid, a key element to U.S. critical infrastructure. Anfield shares could do very well in a U.S. uranium resurgence.
Do your own due diligence. It’s your money and your responsibility. Author is long AEC, NXE, and SYH at time of publishing.
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