How to invest in uranium?
Is the uranium mining and nuclear power industry really so promising and which ones are worth buying to invest in? Nikolay Dudchenko, an independent financial analyst, answered the question posed by Fortrader magazine.
- Before we get to the analysis of uranium mining stocks, let me say at once that this market is quite specialized. How can I not recall the famous quote by W. Buffett, "Never invest in a business you don't understand". Thus, if you do not understand the uranium mining market, it is better to refrain from investing, or to enter for a relatively small amount, fully aware of the risks involved.
Now, actually, to the question of the uranium situation on the market. According to Bloomberg, the growth of prices for uranium futures is primarily due to the operations of the Physical Uranium Trust fund from the Sprott company. The fund started buying uranium contracts quite aggressively, ensuring the growth of prices for the energy carrier to historic highs.
Dynamics of uranium quotationsThe COVID-19 pandemic, which led to a shortage in the uranium market, also played an important role in the price increase.
Nevertheless, experts say that the main reason for the price rise is the fund's operations supported by ordinary investors (Robinhood and the like). In other words, given that the uranium market is "thin," we are dealing to a certain extent with a speculative price run-up, which, as we know, can end as quickly as it began. That is, the situation is somewhat reminiscent of the story with GameStop Inc. shares, which, as we remember, soared to $480, but are now stably trading at $180 - 2.5 times cheaper.
Further, we should not forget about such risks for uranium as ESG ("green energy"). As we all realize, uranium mining technology can hardly be classified as "clean" energy, which means that this technology is unlikely to become a trend on the market in the future.
Now regarding the stock. Although Russia has some of the world's largest uranium reserves (about 9.15% of the world's resources), the country has only about 7 deposits. Thus, it is quite problematic to invest in shares of uranium companies on the Russian stock market.
However, if there is such a desire, you can pay attention to the following companies: - this is the nuclear company of Kazakhstan. The shares are traded on the London Stock Exchange. The capitalization of the company is $9.64 billion. The paradox is that it is quite difficult to evaluate the company, for example, with the help of comparative analysis. Kazatomprom's P/S is 24.66, while most of its major competitors are unprofitable, i.e. it is impossible to use the classic multiplier in this case. The company's P/S is quite low and is at 6.4, but the more interesting one, in my opinion, is 4.4, which is the average value in the industry.
You can also pay attention to Canadian , whose shares are traded on NYSE. However, here the situation with financial indicators looks somewhat sad. The company's revenue has been systematically declining for the last 4 years. According to the latest reports for 2020, the revenue amounted to 1.8 billion Canadian dollars, falling by 3.4% compared to 2019. The company reported negative net income for the past year.
Also, certainly not to be overlooked is the . Here are funds that invest in the uranium mining industry:
Here, however, it is worth remembering that these funds are likely to be inaccessible to non-squalifiers in Russia.
: investing in uranium is dangerous and complicated. Now you just have to answer the question for yourself - is it necessary? I have answered it for myself. Although, not so - for me this question simply did not stand....