Uranium investing has been severely hurt by all the bad news regarding nuclear power plants following the Fukushima Daiichi disaster in Japan last year. Immediately following this horrific accident, many investors got out of uranium investing and went to the sidelines until the future of the industry was clearer. Recent events are now allowing the clouds to part for uranium investing and perhaps the tide may be turning for those interested in long-term investing.
Nuclear energy and uranium investing are here to stay. Demand for electricity, especially for the manufacturing sector, is going to continue for decades, which is what you want to see when committed to long-term investing. The International Energy Agency forecasts global electricity demand to grow 2.4% a year for the next two decades, but emerging markets are growing much faster than that. India’s electricity consumption will grow 5.4% per year, while China’s will grow four percent per year for the next couple of decades. In total, the International Energy Agency estimates that global electricity demand will grow over 80% by 2035. When looking at long-term investing, I want to see consistent demand for decades to come.
Part of this push to electricity generation will come from natural gas, especially in North America where gas prices are cheap. I recently wrote an article detailing how an investor can profit with long-term investing in this sector (How to Profit from Low Natural Gas Prices). But, internationally, natural gas is not cheap everywhere. This leads us back to uranium investing to profit from the growth in nuclear energy with long-term investing over the next few decades.
Before Fukushima, there were 62 nuclear energy plants under construction and 156 nuclear energy plants on order. After Fukushima, there are currently 60 nuclear energy plants under construction and 163 nuclear energy plants on order. Uranium investing has actually increased. Currently, there are 435 nuclear reactors online in over 30 different countries. For long-term investing, this means a huge installed base of customers that need supply every year. Uranium investing is a commitment to extract goods out of the ground and having such a big base of customers will provide a base level of demand. With all of the rising demand in the emerging markets, like China and India, this incremental push is a strong wind for the long-term investing outlook in uranium investing.
The U.S. has joined the demand in uranium investing by approving the construction of two new nuclear energy plants recently. These are the first such nuclear energy reactors to be approved in the U.S. in over 30 years.
Current world supply is just enough to meet demand, as seen with the price of uranium being stable in the $50.00-$55.00 level. With new demand arising, uranium investing is going to have to increase to keep up. Those interested in long-term investing should consider uranium investing, as the fundamentals over the next decade appear quite strong.
Chart courtesy of www.StockCharts.com
Cameco Corporation (NYSE/CCJ; TSX/CCO) is one of the largest uranium miners and is traded both on the U.S. and Canadian exchanges. The stock trades at a forward price-to-earnings ratio of only 12.16 and has a healthy operating margin of 21.29%. While the stock has been volatile in the past, if we’re looking at long-term investing, one might want to consider Cameco for further research. With the supply and demand for uranium investing in balance for now, I would certainly get more interested in stocks like Cameco once the new nuclear reactors come online and more demand is generated. Uranium investing might be a good area to consider for investors interested in long-term investing for the basic reason that the fundamental drivers are strong for electricity use over the next several decades worldwide.