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Uranium Mining
Stocks Grossly Under Perform Oil Stocks
By Greg Silberman -
GoldandOilStocks.com
August 14, 2007 (GoldandOilStocks.com) – Uranium mining stocks once the darling of the
resources sector have come off the boil. Is this a trend
change or a pullback in a very overheated market?
Until recently the market had been going gaga over uranium
mining stocks. Some say it was classic bubble syndrome. New
floats were coming to market at huge premiums and non-resource
companies were rebranding themselves as Uranium explorers.
Fast forward to the present and we find the Uranium sector
has gone through a significant correction. Is this a change in
trend or a healthy pullback?
What’s surprising to us is that the correction in Uranium
stocks has been closely aligned with the correction in Gold
Stocks rather than Oil Stocks (which have continued to march
higher). We think this is due to the fact that Gold Miners
have significant Uranium deposits and that the fundamentals
behind the Uranium Bull market are not fully understood.
If this is the dawn of a new era in energy it’s not apparent
from the miserable underperformance of Uranium Mining stocks
versus Oil Stocks.
Chart 1 - large cap Uranium mining company Cameco versus Exxon
Mobil (blue)
It seems not all forms of energy are born equal!
Admittedly Uranium Stocks have seen a BONANZA over the last 2
– 3 years which has caused them to become more speculative
than their Oil counterparts. It stands to reason therefore
that a correction in Uranium stocks would be deeper and more
painful than a correction in the rest of the energy patch.
But now that the speculative frenzy is over and we can finally
pick up Uranium stocks at reasonable prices, we need to ask
ourselves, what’s changed?
The answer: not much.
The long-term arguments against fossil fuels become more
compelling by the day:
- Abnormal weather patterns are becoming the norm (?) take
the recent floods in the UK as one of many examples. Global
warming is a reality and burning carbon fuels is the cause;
- Geopolitics are showing no signs of improvement. The
next energy source must be located outside of the middle
east mayhem;
- Growth and industrialization in China, India and the
rest of the world continues at a fierce pace. Current crude
oil prices are reflecting this dynamic and continue to surge
whilst stock markets falter.
Nuclear is probably the only viable alternative to help
alleviate the coming energy crisis both in time and in
magnitude.
For the smart investor with a time horizon longer than a year,
this is a great time to pick up quality uranium mining stocks
at reasonable prices. We have been active buyers ourselves and
have been recommending them to our subscribers.
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