Will the bull market ever come? I know a lot of investors have been asking this question. In order to answer this question, we need to do our research. Having good research gives you the confidence to handle the volatility.
Its critical to access the best information sources, especially when markets get challenging. With the uranium markets, it can be challenging to access information. There is a dearth of good information out there. Fortunately, there is the Uranium Insider Newsletter. We have no affiliation with this newsletter but we highly recommend it.
Dealing with the sea of red
The latest issue discussed how challenging last week was for uranium investors. I know our screens were a sea of red. Its been a tough time for uranium investors. Will it get better?
Uranium Insider had this to say:
Being early in a contrarian speculation takes an inherently different approach from buying into momentum or technical trading. The uranium sector — or the equities, at least — are clearly still in a downtrend or bottoming pattern. Even the very strongest stocks in the sector are chopping around in consolidation. Scaling into positions is something that has worked very well for me over the past two years. Generally speaking, I purchase shares when they are in the red.
The restocking catalyst
The letter then goes on to discuss a key catalyst for the uranium space that is coming. Part of the reason that uranium has been in a bear market is nuclear utilities built up uranium stockpiles, then spent a decade destocking. Rather than buying new supplies, they used their old supplies. This limited the demand in the market. However, this is starting to go into reverse and it will be a key catalyst for the next bull market.
According to Uranium insider, stockpiles of uranium are at a 10 year low. Many nuclear utilities have been sitting on the sidelines due to several policy uncertainties. In western countries there has been political risk around operational extensions for nuclear power plants(politicians don’t seem t realize what is keeping the lights on). Additionally, Uranium investors waited forever for news on section 232 and thee nuclear fuel working group. Once the market has clarity around those issues, more buyers will move into the market. And as we’ve discussed on this site many times before- there isn’t supply to meet uncovered demand for nuclear power plants throughout the 2020s.
This setup might not lead to a sudden spike in the uranium price. However, it will lead to a new normal in pricing. Most major mines need prices above $50/lb, about double the current price, in order to function profitably. From the perspective of uranium investors, its better to have prices rise gradually then stay there for a decade. This will allow more producers to make money for their shareholders over many years.
Uranium Insider covers these issues in detail. More importantly, it helps investors avoid the pitfalls and find the best opportunities in the uranium bull market. Click here to check out back issues of the newsletter, and click here to subscribe.