Staring in disbelief at those jaw-dropping charts of uranium stocks, some investors are starting to question whether the bucking uranium bull is ready to be put out to pasture.
And I know what most of you are asking. 'Huh? What uranium bull?' Which maybe tells you all you need to know about this uranium bull market.
Jim Dines, the Brahma bull of the uranium bulls, has dubbed it the "invisible" bull market, and it may still be. I asked my neighbour if he's aware of the uranium bull market and he looked at me as if I were from the planet Ork. He was dumbfounded.
My barber, who is not the Wealthy Barber, is shrugging off uranium. He still thinks Brylcream, ducktails and Nortel Networks (TSX: NT) are going to make a comeback.
A friend in Saskatchewan, home of the world's largest uranium producer, Cameco Corp. (TSX:CCO), and the world's most sought-after uranium mining prospects in the Athabasca region, thought I was joking when I mentioned the uranium bull.
To uranium bulls, these are positive signposts.
Dines, editor of The Dines Letter, has stated that the time to be wary about investing in uranium stocks is when the brokerage houses start hiring analysts who exclusively cover the uranium sector. It may also be time to pull the plug when uranium is splashed on the cover of Maclean's or Time magazines.
While other commodities such as oil, gold and copper have been hogging the spotlight in this commodities bull market, few investors are even aware of the fact that uranium prices have nearly quadrupled in the past five years, while several uranium stocks boast 10-bagger returns. Yet, the average investor hasn't even heard of Mega Uranium (TSXV:MGA) or Laramide Resources (TSXV:LAM), two of the hottest junior plays in the uranium sector.
Indeed, this may be the quietest bull market in history.
Nine months ago in this space, Dines touted Mega (then known as Maple Minerals) and Laramide as his top two junior uranium plays. Those highly speculative stocks have both since quadrupled, and Dines continues to pound the table over them even though neither has sold a single pound of uranium.
Like Dines, Sprott Asset Management CEO Eric Sprott, one of Bay Street's brightest minds, is among the handful of investment pros who began touting the prospects for uranium stocks years ago. Eric Sprott has singled out uranium as the key energy source of the future and predicts that the price could ultimately spike as high as $100 US per pound.
A global shortage of uranium production, coupled with projections of demand escalating due to a global shift toward nuclear energy, has already pushed the price of uranium to the $40 US range.
Respected investment letter editor Peter Grandich, of the Grandich Letter, recently appeared on Report On Business TV's Market Call program. A renowned gold bull, Grandich spent almost the entire hour answering viewers' questions about gold.
Then, he threw a curve at the gold bugs at the end of the program, picking a trio of uranium plays as his top three picks!
Grandich's uranium picks were Crosshair Exploration (TSXV:CXX), Dennison Mines (TSX:DEN) and Uranium Participation (TSX:U). The latter is an intriguing Bay Street company that invests in uranium oxide concentrates, used to fuel nuclear power plants.
Citing a major worldwide nuclear reactor building program, Grandich wrote in a recent report to subscribers that uranium stocks could rival the "Internet stock-like craze" of the late 1990s.
When it comes to playing the uranium market, there are few alternatives for investors beyond the speculative exploration plays.
For conservative investors interested in a profitable large-cap uranium play, Saskatoon-based Cameco is the lone choice. One glance at Cameco's gaudy chart could have you running for cover. But it's worth noting that many fund managers have already made that mistake, having written off the stock as being overbought over the past couple of years while recommending buying it on a sharp pullback or correction. That hasn't materialized.
Cameco shares, which recently traded in the $40 range, started to come to life six years ago and have since rocketed more than 1,200 per cent. Cameco's market cap has swelled to about $14 billion.
"Cameco has been our uranium recommendation of choice all the way up because we figured that when the lemmings running mutual funds awakened to uranium, they would stumble on this one as the obvious leader," Dines wrote in a report.
According to the International Energy Agency, the nuclear energy industry may receive more than $200 billion US in investment by 2030. Nuclear energy currently accounts for about 16 per cent of the world's electricity supply, but a dramatic global shift in international energy policy is occurring, with many politicians warming up to the controversial issue. U.S. President George W. Bush, Russian President Vladimir Putin and British Prime Minister Tony Blair have all 'fessed up recently to the reality of nuclear energy as an alternative energy source.
Bush recently stated that the U.S. was "addicted to oil.”
Added the former oilman: "I think we ought to start building nuclear power plants."
Energy-starved China is not just thinking - it has been the most aggressive proponent of nuclear energy with a long-term plan to build 32 new nuclear reactors.
The Ontario Power Authority has warned in a report that that province will face a massive energy shortage when the government phases out its four remaining coal-fired power plants by 2009. To boost its energy supplies, the OPA has recommended the province refurbish or replace its fleet of 12 nuclear power plants at a cost of $30 billion to $40 billion.
Privately owned Bruce Power, of which Cameco is a major shareholder, is undertaking an unprecedented $4.25-billion refurbishment of two units at its nuclear power plant on Lake Huron. Bruce Power CEO Duncan Hawthorne's goal is to build North America's first nuclear power plant since an accident at the Three Mile Island plant in Pennsylvania in 1979 set the industry back on its heels.
Since that disaster, and Chernobyl in the Ukraine, there's been a public backlash against nuclear energy. Yet even Greenpeace co-founder Patrick Moore has pitched nuclear energy to the U.S. government as "the only non-greenhouse gas-emitting power source that can effectively replace fossil fuels and satisfy global demand.”
Last year, the Anglican Church in Sydney, Australia, took uranium off a list of unethical investments.
Yet, the average retail investor remains mesmerized by oil and gold and oblivious to a uranium bull market many believe to be in the early innings.
So when will it end?
When my barber is touting uranium play El Nino Ventures, you should be very, very nervous.
Remember the crash of Book4golf.com?
* SAGE WORDS: "People in denial don't believe the lights can go out, but they really can. And will."
- Jim Dines, The Dines Letter, Nov. 18, 2005.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)
