The Investment U E-Letter: Issue # 466
Thursday, September 1, 2005 Uranium Stocks: The Nuclear Option and the Uranium Bull
by Dr. Mark Skousen, Chairman, Investment U Gas at the pump where I live hit $3 yesterday… Wow! It really is time to start sizing up energy alternatives. So we asked Investment U Advisory Panel member Mark Skousen (a legend in our business) for his take on the best energy options right now. He came back with his single best solution, and how to profit from it. Take a look. - Steve Sjuggerud Hurricane Katrina blew into the underbelly of the U.S. like Sherman invaded the South… destroying everything in its path and disrupting the engine of growth. Without a reliable, cheap energy source, the U.S. engine could grind to a halt. Combine natural disasters with the geo-political instability we are witnessing in the terrorist-prone Middle East and communist-inspired Venezuela, and you have a recipe for a never-ending energy crisis. Like $70 a barrel for oil, $5 for a gallon of gasoline, and $11 per million BTUs for natural gas. So, Investment U soldiers of fortune, how do you survive and prosper in this scenario? With nuclear power, specifically investing in uranium stocks. Why the Rest of the World Is Buying Uranium According to Cambridge Energy Research Associates, North Americans will face sharply higher prices to power, heat and cool their homes through at least 2008. Here are a few reasons why uranium is today's smart energy alternative: - Oil and gas are non-renewable resources and subject to supply interruptions.
- Coal is dirty, labor-intensive, and dangerous to workers.
- Wind power has to be heavily subsidized.
- Fuel cells are still searching for a breakthrough technology.
- Electrical power dams have reached the point of diminishing returns and are subject to severe environmental restrictions.
What do we do? Well, it's not too late to invest in Canadian oil and gas stocks and trusts. Canadians don't worry about hurricanes. But here, too, you must be careful: Many Canadian oil and gas stocks/trusts have a checkered history, and their super-high dividends are mostly return of capital. Instead, my real favorite is nuclear power, which employs uranium. Nuclear power is the preferred energy alternative - better and cheaper than coal, water, wind and fuel cells. And the rest of the world already knows this. In fact, Japan five years' worth of uranium in stock, and stockpiling even more. China is building two 1000-megawatt plants every year for the next 20 years. And Pakistan and India are going nuclear with uranium at a rapid pace. How Uranium's Shortage Has Driven Prices Up 275% World demand for uranium is outstripping supply, by as much as 100 million pounds in 2005 (and here we are not counting the clandestine demand for uranium by rogue states such as Iran and North Korea). Not surprisingly, the price of uranium has gone from $8 a pound in 2000, to more than $90 today. The chart below illustrates the constant and current prices of uranium (Source: 1969-1986 Nuexco Exchange Value, 1987-Present Ux U308 Price) Constant (U.S.$ Only) and Current Prices of Uranium 
But it still has a way to go before exceeding its all-time high of $43 a pound in 1979. And uranium is still dirt cheap in real, "inflation-adjusted" terms. According to my friend James Dines, who calls himself the "Original Uranium Bug" (although I think the honor should go to Rick Rule, president of Global Resource Investments, who told me about the incredible prospects of uranium in the early 1990s): "…a uranium fuel shortage has emerged of such magnitude that many of the 441 nuclear power plants on the planet today might have to shut down for lack of fuel…" There's no telling how high uranium prices could go… $70… $100… Who knows? What To Look for with Uranium Stocks Bottom line: invest in uranium stocks NOW! Some self-appointed "gurus" are promoting thinly-traded uranium stocks in Canada that only promise to be profitable sometime in an uncertain future. More seasoned investors are playing it safe with well-established blue chip uranium stocks like Cameco (NYSE: CCJ) and BHP Billiton (NYSE: BHP). BHP Billiton in particular has handed superior returns to subscribers of Investment U's premium service, The Oxford Club. Members recently booked gains of 277% on the company's shares. The Oxford Club, by the way, is a spectacular source of long-term growth opportunities. Out of the 181 advisory services it tracks, The Hulbert Financial Digest ranks the Club's stock recommendations 3rd overall based their five-year performance. (Learn how to get all of The Oxford Club's premium growth opportunities.) Good investing, Mark Uranium producers aren't the only companies generating record levels of cash. Here are 11 more businesses with exceptional earning power. Their wide profit margins are attracting special attention from institutional money. Learn more. Today's Investment U Cribsheet - We'd like to extend our thoughts and prayers to Brien Lundin and the whole team at Jefferson Publishing, colleagues of ours who are based in New Orleans and coordinate The New Orleans Investment Conference.
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