When I think of alternatives to investing in big oil companies like BP and Shell, my mind turns to renewable energy shares. Wind, fuel cells, solar energy, and things like that. But that ignores a successful sector that has been with us for decades, namely nuclear energy stocks.
The big advantage nuclear energy has over wind farms and the like is energy density. From a relatively small plant, a nuclear reactor can generate many megawatts of energy.
Freetrade analyst Gemma Boothroyd has been examining nuclear energy stocks for possible investment opportunities.
Nuclear shares ahead
Boothroyd says: “With Boris Johnson reportedly now ‘gung ho’ on nuclear energy, we might be on the verge of a grand-scale shift to the power source. The UK is grappling with the best way to keep the lights on for Britons, and simultaneously trying to take a step towards a net-zero future. Nuclear looks like the best way to achieve both.”
The war in Ukraine and our desire to wean ourselves away from Russian oil and gas can only add extra impetus. And we just can’t build the renewable energy capacity that will get us to net zero overnight.
So what nuclear energy shares are there out there? Boothroyd has identified a couple of possibilities.
Uranium supplies
One is Yellow Cake (LSE: YCA). It invests in uranium, which it gets from the world’s largest producer of the stuff. That’s Kazatomprom — and if you think it sounds Russian, don’t worry, it’s in Kazakhstan. Kazatomprom is listed in London, so it is also a way of investing in nuclear energy shares.
The Yellow Cake share price has climbed more than 50% over the past 12 months. And it has more than doubled over five years.
The Freetrade analysis points out that uranium prices hit an 11-year high at $60 per pound in March. But Boothroyd also pointed out one specific risk, saying: “Civil unrest in Kazakhstan, where the firm’s mining sites are located, led Kazatomprom to caution of possible supply chain disruptions in the coming months.“
Yellow Cake is, however, planning to ramp up its uranium stocks so it can profit from what it sees as a likely future supply shortage.
More Uranium
Canadian firm Cameco (NYSE: CCJ) is listed on the US stock market. It also deals in uranium and provides fuel for nuclear reactors. Additionally, it also owns a number of its own mines, so its future is not tied to Kazatomprom.
Boothroyd tells us that “the firm’s strategy is to operate well below capacity. In 2021, Cameco was running at 75% less than its full productive capacity, and by 2024 it estimates that will fall even further, down to 40%.“
The plan, then, is to invest in the future price of uranium, not the current price. The prospects for this nuclear energy stock, it appears, will depend on growing demand.
Cameco’s profit plunged in 2021, as a result of its suspension of operations. But analysts are forecasting a rise in sales and profits by next year.
The Cameco share price, meanwhile, has climbed 75% in the past 12 months. And it’s up 160% over five years.