Investing in the latest red-hot disruptive technology is easy.
The whizbang attractiveness of the latest electric vehicle stock trumps boring blue chip stocks any day of the week.
But investing is far harder for contrarians.
They have to look at the headlines and ask themselves whether the opposite of the market consensus is true.
I recommended some out-of-favor investments in the depths of the coronavirus crisis.
Sure enough, the more unpopular the investment was at the time, the more profitable it was a year later.
I recently came across another universally hated sector that could double or triple your money over the coming years.
But as with the cruise lines and theaters I recommended a year ago…
I can guarantee you just one thing: You will hate it.
The Leading “Green Energy” Technology
What if I told you about a renewable source of energy that…
- Doesn’t release lots of carbon into the air…
- Doesn’t rely on a massive breakthrough in battery capacity…
- Is always on, day or night, windy or not…
- Is the planet’s shortest route to net-zero emissions?
Is this the latest radical technology touted by Elon Musk?
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No, it is not.
That’s because what I have just described is none other than much-reviled nuclear power.
The World’s Most Unpopular Investment
Nuclear power has an image problem.
The very thought of nuclear power makes investors squeamish.
The disasters at Three Mile Island, Chernobyl and Fukushima all set nuclear power back by decades.
Yet investors’ repulsion is hardly rational.
Even the worst nuclear disasters haven’t produced massive fatalities.
The nuclear accident at Fukushima – triggered by a devastating earthquake and tsunami – killed just one person.
In the three most affected countries near Chernobyl – Belarus, Russia and Ukraine – radiation doses to the general public were relatively low.
Exploding Demand
Alas, much of the rest of the developed world doesn’t feel this way.
Both Japan and Germany – the world’s third- and fourth-largest economies – have abandoned nuclear power altogether.
But much of the developing world still thinks of nuclear power as “going green.”
Currently, around 50 nuclear reactors are under construction across the globe. More than 300 are in the pipeline this decade.
China, India, Russia, Belarus, Korea, Slovakia and the United Arab Emirates are collectively adding more than 8 gigawatts of new nuclear capacity in 2021 alone.
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Even President Joe Biden has said that nuclear power will be part of the “clean energy standard” in the U.S.
All this new demand is leading to uranium shortages – and soaring prices.
The Uranium Energy Corporation estimates that, in 2021, global demand for uranium will hit 175 million pounds. Production is expected to be 128 million pounds. That implies a gap of 47 million pounds in 2021 alone.
Meanwhile, uranium miners are unprepared.
Output at Kazatomprom, the world’s biggest producer, is at a multiyear low.
Canada’s Cameco (TSX: CCO), the world’s second-largest uranium producer, has shut down all its uranium mines.
Investment bank Canaccord expects uranium prices to average $50 per pound in 2021. That’s a 66% upside from today’s price of around $30 per pound.
Uranium: A Unique Market
All this is good news for investors.
Such supply and demand imbalances can trigger big moves in price.
In 2007, uranium prices soared fivefold in one year to $137 a pound.
Today, uranium prices are still 78% below their all-time high.
But investing in uranium is tricky.
With almost any other commodity, you can buy a futures contract or take delivery of the commodity directly.
But nuclear power plants rarely buy uranium on the spot market.
Instead, most countries sign long-term contracts with a few strategically essential suppliers, such as Kazakhstan and Canada.
How to Ride the Uranium Bull
Once a commodity like uranium gets going, it can maintain that momentum for years.
Unlike in 2007, today some exchange-traded funds (ETFs) allow you to invest in the uranium complex directly.
To bet on a rebound in uranium, you may want to look at the North Shore Global Uranium Mining ETF (NYSE: URNM).
This ETF doesn’t hold uranium itself.
Instead, it invests in companies involved in the mining, exploration, development and production of uranium as well as companies that hold physical uranium, uranium royalties or other non-mining assets.
It has had quite a run since December and is up by 42% this year.
But with the bull market in uranium just getting started, it likely has a long way to go.
Good investing,
Nicholas
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