Uranium: The Leisure Suit of Investments

“You are so on target!!” Paul Cunningham said of the January 11th issue of IDE.

In that issue, we talked about the decarbonization of energy. With global concerns about carbon footprints, the move to nuclear energy is a foregone conclusion in much of the world. Why? Just look at the numbers:

• 1 kg of firewood produces about 1kWh of electricity.
• 1 kg of coal or oil produces about 3 or 4 kWh of electricity.
• 1 kg of natural uranium produces nearly 50,000 kWh of electricity!

China has taken the lead, with plans to build 10 new reactors a year for the next decade. India and Russia aren’t far behind. The U.S. has 17 applications to build 26 reactors waiting for approval. Energy consumption is expected to grow by 40% by 2030. And nuclear is the only source that can meet that demand.

That, briefly, is the case for a long-term bull market in uranium. It’s a simple case of supply and demand. Current uranium production doesn’t meet current demand. And demand will do nothing but increase as more reactors come online.

Paul Cunningham continues:

“When I was head of an electric utility, I pushed for a greater position in nuclear, only to be shouted down by the environmentalists who carried the guilt of Hiroshima and took advantage of the two nuclear ‘events’ you mentioned.

“Sadly, we are now behind other nations in utilizing this technology. It is not perfect, but is certainly the best of all currently available electric energy sources.

”Keep up the good work!”

And Bruce McKeon had this to say:

“Darn! I got rid of my leisure suit years ago!

“We still have to address spent fuel storage and conversion, and get over the NIMBY behavior that has not allowed that to happen in the past. Meanwhile, uranium mining seems a good investment.”

The Wrong Stuff

But Jon Volz had a different reaction:

“Your newsletter has been a bastion of articles about the pitfalls of the phony economy and the danger in investing in the broader market.

“Now that it’s up 60% – largely without your readers’ participation because of your advice – you say it’s real and that we should get in !!!

“I have been getting more skeptical of your letter over the last 3-4 months. You have been added to my list of WHORES and Thieves that permeate our financial society.”

Jon Volz has it all wrong.

First, to be categorized as a thief or a whore, money has to be involved. And the information and perspective you get from IDE is free.

Second, throughout 2009 our analysts were recommending lots of ways to profit from the market. They provided dozens and dozens of individual recommendations – stocks, bonds, options – you name it.

And their readers profited handsomely. For example:

• Andrew Gordon recommended a gas company that is up 68% in the last 13 months.
• Steve McDonald recommended a steel producer that was up almost 70% in only seven months.
• Dr. Russell McDougal saw two of his recommendations end last year up 124% and 179%, respectively.
• Ted Peroulakis recommended 17 100%-plus winners, including a 116% and a 194% gain on the same energy company.

Jon Volz may be confused because he reads only IDE, where we talk about market news and trends but don’t provide specific investment recommendations.

Or he may have a hard time understanding what we’ve been saying, repeatedly, in IDE this past year– that the key to profitable investing is threefold:

• First, identify a trend.
• Next, buy quality investments that will benefit from that trend.
• And, finally, don’t pay too much for them.

This is a simple model, but one that few investors – even professional investors – follow. Most investment “experts” focus on one or two of these elements but ignore the other(s). This makes no sense.

Buying quality investments means investing in sound companies that have good management, good prospects, and a history of real profits.

Buying quality ensures that you get something of lasting value for your money. You won’t end up with a worthless piece of paper if you adhere to this fundamental rule of investing.

But even buying quality companies won’t do you much good if you pay too much. Good companies are not always priced correctly. Sometimes they are cheap. And sometimes they are expensive. By keeping an eye on valuations, we make sure our readers don’t pay more than they should for their investments. This keeps them out of trouble during bubbles.

Identifying trends is critical in terms of profit appreciation. Sometimes those market trends are real (in the sense that they are responding to real changes in the economy) and sometimes they are imagined or the result of hype (during bubbles). But being able to see trends is a very necessary part of profitable investing.

And that’s what we do at IDE. We study the markets for trends. We identify those trends for you. Then, in our paid-for publications, such as Sound Profits, we investigate and recommend specific investments that meet our other two criteria – i.e., they are quality investments and can be bought at reasonable valuations.

The Right Stuff

Over the last year, we’ve reported on significant problems – including (to name but three) high unemployment, a dismal real estate market, and the fact that the only real spending is coming out of Washington.

But we’ve also uncovered great opportunities. In fact, in the most recent issue of Sound Profits, we identified six long-term trends that will provide dozens, if not hundreds, of significant profit opportunities in 2010.

And, as I mentioned above, our track record speaks for itself.

Ted Peroulakis had 17 winners – with at least 100% gains – in only six months. Dr. Russell McDougal has made 11 recommendations since I came aboard. Right now, 10 of them are winners, and the only losing position in the bunch was an 8% loss. All 15 of Andrew Gordon’s recommendations in his Premium Income portfolio are making money.

Steve McDonald must be the best-kept secret in the bond world. He has made over 90 recommendations to his readers, and has taken only one loss. That was on CIT Group, and the company went bankrupt. Still, Steve’s members took only a 15% loss on that one.

Rather than get himself worked up over perceived inconsistencies in what we’ve been saying, Jon Volz should make a serious commitment to having a profitable investment year in 2010.

He can do that by subscribing to Sound Profits today.

Sound Profits will give him access to the specific trend analysis and investment recommendations of all of our analysts and investment experts, including Steve McDonald, Andrew Gordon, Dr. Russell McDougal, Ted Peroulakis, and yours truly.

If he subscribes today, he can get immediate access to the last issue, where we spell out the six long-term trends we’ve identified, as well as our recommendations on:

• The company set to cash in on the three mega-trends that will drive healthcare for the next 50 years. Their “MOBs” are the wave of the future.
• And a company that has been hiking its dividend to shareholders for the past 26 years! It’s the “crown jewel” of the insurance industry.

You can learn more about these winners and see the rest of our Sound Profits portfolios by clicking here.

So, what’s on your mind? We welcome your feedback. Email us at: feedback@investorsdailyedge.com

Invest Safely,

Bob Irish
Investment Director
Investor’s Daily Edge