Opinions
John Zechner
Uranium Participation Corp.
U-T
TOP PICK
May 25, 2015
Stock price when the opinion was issued
You might be interested:
He doesn’t like this. A closed-end company that owns uranium. There is an NAV discount sometimes. There is always a fee that trickles away at your NAV. Whenever uranium is hot, which it is not right now, the company comes out and issues more units, so you never get that incremental premium.
Materials stocks tend to do well from November through until April. This one runs from October all the way through to late February. It gains about an average of 18%. We haven’t seen the fall-off that is typical of the cyclicals falling off at this time of year. In fact, it looks like it is starting to carve out a longer-term base. It is starting to test its 200-day moving average. If you are a longer-term holder and it is still below its 200-day moving average, that would give him caution, but it looks like it is starting to knock up against the door, and is supported by its 20 and 50 day moving averages.
Uranium. The Japan disaster changed the world’s view on uranium. There is a reactor in South Florida that they are worried about. He thought Uranium would be part of the clean solution for power. India and China are building them, but there is a bias to moving away from them. There is no shortage of Uranium. It is on the cheap side now so don’t look for too much in term of growth.
It is a holding company with 85% of assets in uranium. Seasonality, the world nuclear association meets in September and these stocks rise just past that meeting, which has just happened. We are just at the breakout point. If it gets past $4.70 it would be a good time to step in and hold to the end of the year.
He prefers CCO-T. The uranium space is one he really likes. He thinks we are going back to nuclear power as you can only have so many wind turbines and solar panels.
Uranium is one of the few commodities trading at a discount to its global cost of production, of around $60 a ton. You are not going to see new supply from mines until you see something around that price. The long-term contract price is around $50 and the spot price is around $35. With this company, you are effectively buying uranium at a bit of a discount at around $33-$34. At some point there will be a rise in the global cost of production. There are a couple of catalysts including 1) all of the Chinese reactors coming on in the next couple of years, 2) a restart of some of the Japanese reactors and 3) supply is going to be constrained with no new supply coming on.