Key points
- The energy sector is embarking on a common path that will strengthen the need and popularity of renewable sources.
- Hedge funds know this and have quietly built positions around these uranium mining company names, which share another common thread.
- A massive rise has earned them the love of the market, and analysts say the math holds up for rallies to come.
- 5 stocks we prefer over Ur-Energy
Just as many investors have invested in Chinese names, such as Alibaba Group NYSE:BABAAfter Ray Dalio argued that, a wave of money will jump into the industry’s favorite coin today: uranium.
Supporting names like Cameco Company NYSE:CCJ And Ur-Énergie Inc. NYSE:URG have enormous potential.
Reverse engineering
Suppose you want to dig energy values and their likely evolution over the coming decades. In this case, there is only one reasonable answer: renewable energies. Of all the alternatives, solar power gets all the love and attention today, so it’s safe to assume that hedge funds aren’t interested in it.
That leaves another player on the table: nuclear power. Do nuclear energy available and scalable, sufficient uranium supply and processing can make this possible.
The last oil fluctuations and the added geopolitical risks have led some to speculate on a barrel price of 150 dollars soon. As more minds support this idea, they will look for a cheaper alternative.
Because knowing which energy company will become the leader in nuclear power is like having a crystal ball, one constant must shed light on this hypothetical name: uranium miners. This is why so much activity has been devoted mining stocks around this trend.
Greatness in reverse
Terra Capital, Segra Capital, Argonaut Capital Partners and Anaconda Invest have one thing in common: they have quietly built their momentum and accumulation around the trend described above, primarily focusing on two winning names..
When you break down the mining sector, you can easily find it with MarketBeat stock screener.
The sector trades at an average ratio of 11.0x, with an expected average earnings growth rate of 32.5% for the next year.
Starting with Cameco, the market rewards the stock with a valuation of 20.8x, which represents an 89% premium to the sector. Now most value investors would be scared to invest in the most expensive name in the sector; But they would be wrong to avoid Cameco.
This company has analysts waiting an EPS increase of 288.7%, well above the expected industry average. There is a justifiable reason why the market and hedge funds are willing to overpay for Cameco stock; It is growth potential surrounding an unstoppable industry trend makes it a deal any day of the week.
Now, what does the smallest name on this list, Ur-Energy, say? It trades at a massively higher P/E of 110.1x. Do the math on how much that bounty is, and follow the thread to the promised land and why it deserves such a high valuation.
Mathematics is also checked, with analysts expect a growth rate of 150% for EPS. Given the much higher P/E multiple, the stock could rise much higher despite its growth rate being nearly half that of Cameco.
Before you consider Ur-Energy, you’ll want to hear this.
MarketBeat tracks Wall Street’s top-rated and top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat identified the five actions that top analysts are quietly whispering to their clients to buy now before the broader market tanks…and Ur-Energy wasn’t on the list.
Although Ur-Energy currently enjoys a “Buy” rating among analysts, top-rated analysts believe these five stocks are Better Buys.
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