Excerpt on Uranium. . .

“Either you’re a contrarian, or you’re a victim – it’s up to you.”

These words that CEO of Sprott Resources, Rick Rule, said resonated in my head. Such a profound statement I thought.

To me this meant as either you have an independent and educated opinion contrary to the crowd’s view, or you will simply follow the crowd. And following the crowd is never going to make you rich, unless you got in first.

Good contrarian investing is about finding markets that are ignored and despised. This allows you to buy quality assets for pennies on the dollar. Especially in commodities. People are still eating and consuming energy every day. The oil market has had many booms and busts, but the world is consuming more oil than ever.

Uranium prices have fallen 70% over the past 5 years. And the uranium mining industry has been in crisis. But being a contrarian, you look for when prices, perception, and value disconnect.

This creates the opportunity today in the uranium market

Uranium is an abundant source of concentrated energy. The energy content in uranium is 3 million times greater than fossil fuels. For instance, 1/10 of an ounce of uranium holds the equivalent energy that over 6.6 million pounds of coal has.

It is clean energy. Uranium produces no greenhouse emissions. And it is relatively safe contrary to conventional wisdom.

Uranium spot price is currently $20.50 per pound.

 

Excerpt on Strategy. . .

 

This is text-book economics.

Oversupply crushes prices, which discourages investment and exploration and production. This is a bottoming/liquidation phase. Supply comes offline from marginal producers closing shop and low prices discourage exploration.

Figure: As of July 2017, the uranium is in the oversold and accumulation step

The cheap prices of uranium increases demand. Lower prices incentivize more cheap energy and attractive nuclear power plant margins. Just like cheap oil, more individuals drive bigger gas-guzzlers and take longer roads trips because a gallon of gas is cheaper. . .

 

Read the rest of the article and my strategy here.