My 2011 Uranium Trade (The Reformed Broker - Joshua Brown)

• Posted by Joshua M Brown, January 27th, 2011 at 12:00 pm
 
• Comments: 2 Comments

Before reading another word, please ask yourself if you're capable of being an adult and not just blindly trading based on what's written here.  Nothing on this site should ever be considered a blanket inducement to make investments.

OK, now that the children are gone, we can continue.

Last night on Fast Money, I mentioned Cameco (CCJ) for the Final Trade segment.  It's a fairly big name but many of my friends on The Street pinged me to say they'd never heard of it.

I'm going to give you some insight into why I've gotten extremely bullish on the Uranium Trade for 2011.  Please keep in mind that any opinions expressed here are subject to change without notice and that I'm not your advisor or broker - I am simply giving you some background on a theme I'm very excited about.

Before I talk stocks, I want to give you some background on the supply/demand picture for uranium itself, because the setup here is delicious.  We'll let Barron's Roundtable legendFelix Zulauf do the talking first, this excerpt comes from his 2011 outlook in which uranium played a starring role:

My next recommendation is in energy, because the rise of emerging economies also leads to rising energy demand. Electricity demand probably will double in emerging markets in the next 20 years. I would buy uranium. It is used to power nuclear plants, and it is used for medical diagnoses and research. There are 441 nuclear reactors operating in the world. They require 185 million ounces of uranium per year. There are 331 proposals to build new reactors. Fifty-eight new reactors are under construction, up from 52 a year ago, and 148 reactors are planned, including 110 that will come onstream in the next 10 years. Twenty reactors will be shut down. The demand side looks solid for many years.

Uranium production is growing, but slowly. Annual production is 47,000 tons. It meets only 60% of demand; the rest is met from utility stockpiles or decommissioned nuclear weapons. Production will increase over time, but it could take 10 years or more until it is sufficient to meet demand.

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