Uranium EXPLODED Today
Uranium EXPLODED Today
Why was my uranium portfolio up 20% today?
I wanted to put out a quick alert to everyone who has been listening to me and following the uranium market. If you haven’t, you will wish you had. I wrote on July 8th about the uranium market and why I was EXTREMELY bullish on the fundamentals.
If you missed it, check it out here.
In my July 8th report, I said:
“If you believe in the uranium thesis like I do, then the recent discount in price is a gift. Many will look back at today’s prices and kick themselves for not getting in.
—Eric Hyde (that’s me!), The Tobin Report, July 8th
Okay, enough about me. Let’s get you up to speed.
Up To Speed
For many months, the sector has endured a brutal drawdown. Most uranium stocks were down by 50%, or more. However, history has shown us that in uranium bull markets, a 50% drawdown is NOT uncommon. If you’re in it for the long haul, you have to buckle up and be willing to ride it out. Position sizing is crucial. Deploying capital in tranches is also key.
So what happened today? Why were the U stocks up by 10%, 15%, and as high as 23% in ONE DAY?
I can tell you in on word:
JAPAN.
The sector was ripe for an explosion. Sorry, bad joke. Pun intended. Since the inception of the Sprott Physical Unranium Fund, we have seen positive news flow after positive news flow; it was just a matter of time before the U308 market ripped higher. We just needed a catalyst.
Well last night, August 23rd, we got one.
Japan signaled a return to nuclear power over a decade after the the Fukushima disaster.
As Donald Trump says, “IT’S HUUUUGE!”
Why Does This Matter?
Simply put: Supply. Demand.
Boom. (I know, that’s annoying)
Demand for uranium is increasing. Supply of uranium is shrinking.
The world needs a LOT more uranium to meet increasing global demand, and the current spot price of $48 per lb. is simply not high enough to incentivize the new production that will be needed to fuel the new reactors slated to come online.
This means the spot price of uranium MUST and WILL go higher in order for uranium explorers, developers, and producers to make their projects worth their time.
Here’s an analogy:
Suppose you have a skill or product that is in high demand. EVERY country needs it. EVERY country uses it. EVERY country is announcing their increased need of your product. And as it turns out, it is NOW politically correct to use your product as it was recently voted ‘green’ and part of the “ESG” movement. This also means hedge funds, institutions, and governments are now clear to invest in your skill or product.
Soooooooooo…do you take the current rate of $48 when it costs you $60 to make? Or do you hold out on releasing your product until the offer is much higher. Yeah…you go the ‘much higher’ route.
In other words, most uranium developers/producers that are sitting on large mineral uranium deposits won’t start building their mines unless utility buyers contract for much higher prices.
It’s that simple.
Does that mean uranium stocks that RIPPED today will just go straight up? Of course not. But this is one of the biggest developments I’ve seen.
Almost all of the uranium equities looked like this today. Look at the chart below:
Breakout above the wedge pattern (VERY bullish in technical analysis)
Price ripped 15% in one day
HUGE volume - this is INSTITUTIONAL BUYERS. Across the sector. HUGELY bullish.
Sooooooo, what does all this mean for someone who doesn’t study the uranium market every day like I do?
What To Do:
“Eric, what if I didn’t listen to you before and don’t own any uranium stocks?
Is now a good time to buy?”
As I cannot give investment advice, I’ll tell you what I would do if I owned zero uranium stocks. I believe this uranium bull market will go MUCH higher than the prior one. I believe it will produce life changing returns that only those who have endured the volatility will reap such gains.
That said, I would position in the largest uranium producers that will benefit from higher uranium prices. This is the safest play.
Then, I would put some money to work in companies developing mines that don’t yet produce uranium (lower market cap) but will produce uranium during this bull market.
Decide how much total money you would like to allocate to this sector and divide it into several tranches. After your first purchase, all remaining tranches should be purchased on dips…on days when it hurts to buy because your screen is red.
I never buy on UP days because I don’t chase.
You, on the other hand, have two options.
Buy shares NOW to participate in the bull run in case they continue to take off. IF the boat is leaving, at least you will be on board.
OR
Wait until the next significant dip in price. They WILL dip…but I can’t tell you at what price level. It could be TODAY, as you are reading this. Or it can be in a couple weeks.
These decisions are personal decisions. You must assess your risk tolerance and time horizons.
What Uranium Companies Am I Invested In?
I’ll make you a deal. For anyone willing to share The Tobin Report, I’ll send my list of uranium companies that I currently own. Once you have done so, email me and let me know!
ericthyde@msn.com
I’m looking to grow this list. Thank you for your support in reading.