November 6, 2024
No Politics, Just Profit!
Dear Subscriber,
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| By Sean Brodrick |
Today I have for you what I like to call a 24/7 profit play.
No, this isn’t about the political ad cycle. But it should be another enormous opportunity for those who know about it.
Here’s the setup: Uranium stocks have been on a slippery slope lately for two reasons.
It won’t last, and you can scoop them up while they’re cheap, before they blast off like atomic rockets. I’ll tell you why.
Uranium Pullback Reason No. 1: Price Dip
The price of uranium in the spot market — where speculators buy and sell the energy metal — has pulled back to its lowest level in a year.
It could go a bit lower, sure. And this dip has depressed uranium equities. But the big trend in uranium prices is up.
I’ll give you some fundamental reasons for that in just a bit.
I’m confident we’ll see $100 spot uranium prices in short order.
Uranium Pullback Reason No. 2: Regulator Delays
Amazon’s plans to build a new hyperscale data center next to the nuclear power plant near Susquehanna, Pennsylvania, have hit a significant roadblock.
The Federal Energy Regulatory Commission (FERC) voted 2-1 to deny the expansion of an existing data center power agreement that would have allowed Amazon to connect directly to the power plant.
At the same time, Meta’s plans to build a new AI data center near an operating power plant — to use that as a power source — has also seen regulatory hurdles pile up.
This news sent uranium stocks skidding lower, with the Sprott Uranium Miners ETF (URNM), a basket of leading uranium stocks, dropping more than 13% from its Oct. 18 high.
This is all short-term sentiment. The zigs and zags of data center and power plant regulation don’t really impact the longer-term demand for uranium, which is only going to grow.
Now, I’ll show you charts on why uranium prices are going higher for longer.
3 Charts for a Profit Treasure Hunt
First, look at how global demand for nuclear power is ramping up.
Around the world, nations are restarting mothballed atomic power plants and building new ones.
The trend is clear, according to a projection from the International Atomic Energy Agency …
According to the International Atomic Energy Agency (IAEA), the forecast for nuclear power demand is significantly increasing, with a projection that global atomic capacity could more than double by 2050.
Electric power from nuclear energy and the uranium that powers it is a long-term game.
Utilities can see their demand coming a long way off … and buy in anticipation.
However, due to “high” prices and other factors, they’ve been putting off buying as much uranium as they’ll need in the future.
I’ve talked about the uranium spot market. Utilities generally buy uranium in the long-term contract market. And there can be quite a difference between the spot and contract price.
In the first nine months of this year, the long-term contract market was a ghost town.
Contracted volumes in the first nine months came to 53 million pounds of U308 at $81.50 a pound. That’s way down from 145 million pounds in the same period last year. But last year, contract prices for uranium were $20 less per pound.
Then in October, contract volumes jumped by a whopping 27 million pounds. So, maybe utilities are starting to wake up and smell the coffee.
For various reasons, part of the squeeze in the uranium market is that there is less supply from Kazakhstan, the world’s biggest uranium miner.
Utilities may have delayed buying earlier this year figuring that Kazakhstan will produce more next year, and they’ll get cheaper prices.
Maybe. On the other hand, when Kazatomprom, Kazakhstan’s state-owned uranium company, lowered its 2025 production forecast, that marked the FIFTH YEAR IN A ROW that Kazatomprom lowered its forward guidance.
Something is seriously wrong in Kazakhstan.
This brings me to my point: Utilities have not bought enough uranium for future needs. In fact, through 2040, 60% of their requirements are uncovered!
I don’t see how that resolves without much higher prices.
One more point: Thanks to AI, big tech and the electrification of everything, the electricity demand will only grow.
Goldman Sachs predicts that data center power demand will experience a 15% compound annual growth rate.
According to a study by McKinsey, demand from data centers alone should rise to above 10% of total U.S. power demand by 2030.
Data centers run 24 hours a day, seven days a week. That demand is going to be enormous.
The only reliable way to ensure electricity is available at that scale is to build more nuclear power plants.
And that means more uranium demand. A lot more.
How You Can Play It
An easy way to ride this megatrend is to buy that fund I mentioned earlier, the Sprott Uranium Miners ETF. It’s on sale now.
Like the spot price of uranium, this ETF that holds a basket of uranium equities is well off the highs it hit earlier this year.
But again, the big trend is up. And that means this pullback is a buying opportunity.
Sooner than later, Amazon and Meta will probably figure out their regulatory issues.
And at some point, utilities will have to pick up the buying they’ve put off for so long.
And that’s a one-two combo that will power uranium equities higher.
The URNM is a great way to add these dirt-cheap miners to your portfolio.
You can also drill down into the ETF for individual names.
The bright and shining future for these stocks lies ahead. Make sure you have some in your portfolio.
All the best,
Sean
P.S. I hope you were able to watch this presentation on the “Golden Window” that officially opened yesterday. If not, you’re running out of time. You can still do so here. But you better do so today!
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