Cameco Corporation (CCO.TO)

Uranium is always difficult. Every uranium company has had a difficult time earning an acceptable ROC. This has a 4% ROC, and he would have trouble justifying the price.

The period of seasonal strength is October all the way through to January. The best months of the year are November and December. It bottomed in the month of November, ran up to January and has consolidated since. Now it is flagging. The chart is showing a consolidation pattern, nothing bullish or bearish, but it would suggest that break would be in the direction of the trend, which is higher. Wait for this to break.

The world’s largest publicly traded uranium producer. The stock has been in a slump since the Fukushima disaster in 2011. Things started to change in advance of changes of the uranium market fundamentals last summer. Kazatomprom, Kazakhstan’s state owned mine, which owns 30% of the uranium market, decided to cut production by 10%, which will meaningfully tighten things. The price has responded. Cameco has a dispute with Canada Revenue on back taxes and transfer pricing, which is not going to go away in the next 12-18 months. They also have a dispute with the Tokyo Electric Power Company.

2.9% dividend. Supply vs. demand, which dried up due to the Japanese nuclear accident. He wants to avoid it. It is not a commodity he wants to do.

On uranium demand, the market is probably not going to come into balance until 2024 or so. It is hard to see how this company can do well when there is not going to be much of a lift in uranium. Expects it to be range bound for the foreseeable future in the $10-$15 range. It’s best of breed and he likes the name, but it is very hard without a resurgent in the uranium price. Doesn’t know why you would want to be a buyer of this.

This has a couple of problems. There is a big tax liability outstanding, which is a substantial issue. The pricing of uranium is problematic. This is world-class in terms of its resource, but he just doesn’t think there is any pricing power. Thinks it is dead money.

He was short until November when it started to turn the corner. It has taken off since then. The valuation is a bit of a challenge for him. The commodity is changing very quickly. Uranium has come off its bottom. On a price/momentum basis you could own it, but there has been a big move without knowing that cash flows will show up in the share price. Wait until earnings materialize.

There has recently been a rally in uranium stocks. The general impression is that uranium prices have probably troughed at the $20 spot level. There is no near term catalyst to get the prices going up. It is unprofitable at this level for mines to be producing, and mines have been shutting down. Nuclear reactors have been very slow to start up with very weak demand for uranium.

Owned this in the past, but sold it last fall. If bullish on uranium, this is one of the very, very few ways to play the trade. Physical uranium, unlike most other commodities, is restricted because it is dangerous and has uses in weapons production. This is the most liquid way to play an improving uranium market. It looks like the supply/demand balance is shifting heavily and moving closer to balance, and this company should benefit from that.

Owned this years ago, and has no intention of buying again. The stock has done better with uranium and energy prices in general going up, but uranium is uranium. You read in the papers about 60 nuclear plants being built, but that was 6 years ago, and they are still having trouble bringing them on. He would avoid this.

What would be a trigger to make you purchase this? This is a commodity that has been in decline for a decade. It really got hurt when we had the Fukushima tsunamis. Japan shut down a lot of the nuclear reactors. He would want to see Japan restart their reactors. There is a big supply of uranium available, and you have to question where the demand is going to come from.

This has really been spanked in the last 4-5 months, taking it down from $13-$14 to around $10, and it is now coming back. When watching some of the commodities, the recovery in some of them fits into the whole infrastructure buildout and fiscal policies. There is always demand for uranium, because all global reactors need to be refilled, and this company is the low cost one. At this price, you won’t hurt yourself, you just have to wait for materials to come back in again.

His model price is at $15.71, a 21% upside. It looks like it is going to go to $14.63. Pays a 3.43% dividend.

It has been in a distinct downward trend for years. Last year it did not do anything. This year we have mild encouragement. It is trying to bottom. Short term momentum indicators are positive. It moved above the 50 and 20 day moving averages.

For a 5+ year hold? On a 5-year basis, even on a 1-year basis, he would say this is definitely a Buy. It has undergone a fair bit of pressure in the last year, which has to do with the Spot uranium price, which has been very, very weak. Also, they are going through a tax battle with revenue Canada.