"I predict that 2007 will end with a bang and not a whimper," says global expert Nick Vardy, who predicts a strong a strong fourth quarter global rally.
Meanwhile, in his industry-leading Global Bull Market Alert, he notes, "Canadian mining giant Cameco Corp. (NYSE: CCJ) combines the global commodity supercycle theme with the recent turnaround in the price of uranium."
Vardy explains, "As the world's largest uranium producer -- accounting for around 20% of global uranium production -- Cameco is the closest thing to a blue chip name in what has been one of the hottest sectors in the past few years."
Why? He states, "Blame the law of supply and demand." In 2006, he observes, the world's nuclear reactors used 173 million pounds of uranium. Yet uranium mines only supplied 103 million pounds. The gap, he contends, was met by dwindling U.S. and Russian government stockpiles of weapons-grade uranium from decommissioned nuclear weapons.
"And the supply and demand imbalance likely will get much worse," says Vardy. In the past 12 months, he notes, the number of proposed nuclear reactors has risen by 67% to 256 as governments across the globe turn to nuclear as a way to cut carbon emissions quickly and painlessly.
Up to January 2006, he observes, Cameco's share price tracked the uranium price closely. Since then, however, the price of uranium at $85 is still 125% higher than in January 2006, while Cameco has only gained around 19% since then.
To explain this disconnect, he says, "The company's shares were hit badly by flooding at the Cigar Lake mine in the Canadian province of Saskatchewan. The mine had been expected to provide about 18 million tons of uranium a year, or 17% of world production, when it began producing in 2008. But the flood means the mine is now unlikely to come on stream before 2011."
IN addition, he observes, the price of uranium also dropped over the this summer. He suggests that the credit crunch was partly to blame, as hedge funds were forced to sell uranium holdings to fund losses elsewhere.
"So what makes Cameco a terrific trading opportunity today?" he asks. First, he notes, the the price of uranium has once again begun to rise. In addition, he observes that October coincides with the refueling cycles at nuclear plants in the United States.
The advisor states, "Although it will take some time for Cameco's management to regain investor confidence following the problems at the mine, the recent drop in the share price, combined with a rebound in the price of uranium makes it a terrific time to get into the stock."
Cameco agrees, according to Vardy who points out the company just recently bought back about 5% of its own common shares, representing about $750 million. The advisor rates the stock a buy, while cautioning that investors should expect more volatility in this stock -- both on the up and downside.
Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.
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