Is Cameco (CCJ) the Best Uranium Stock To Buy According to Hedge Funds?

Mashaid Ahmed

Sun, Sep 29, 2024, 7:57 AM 7 min read

Uranium Market Outlook

According to a report by the World Nuclear Association, the uranium market is a complex and cyclical industry, with prices fluctuating based on demand and supply. In recent years, primary production from mines has supplied around 90% of the requirements of power utilities, with the remaining 10% coming from secondary sources such as ex-military material, recycling, and stockpiles. The demand for uranium is driven by the need for fuel to power nuclear reactors. There are currently around 440 reactors worldwide, with a combined capacity of around 390 GWe. These reactors require around 80,000 tonnes of uranium oxide concentrate each year, which contains around 67,500 tonnes of uranium.

The uranium supply comes from various sources, including mines, stockpiles, and secondary sources, such as recycled uranium and plutonium. In 2022, mines supplied around 58,201 tonnes of uranium oxide concentrate containing around 49,355 tU, around 74% of the utilities’ annual requirements. Secondary sources of uranium include recycled uranium and plutonium from used fuel, re-enriched depleted uranium tails, ex-military weapons-grade uranium, and civil stockpiles. These sources, such as mixed oxide (MOX) fuel, can be converted into usable fuel.

The demand for Uranium is expected to grow over the next decade. The World Nuclear Association’s Nuclear Fuel Report indicates a 28% increase in uranium demand over 2023-2033 and a 51% increase in uranium demand for 2031-2040. However, the uranium market faces several challenges, including the need for increased investment in new mines and infrastructure, as well as similar policies that give preferential to subsidized wind and solar sources. There are growth opportunities, particularly in nuclear energy, which is expected to play a key role in reducing carbon emissions and meeting increasing global energy demands.

Big Tech Investments in Nuclear Energy to Drive Sector Growth

In an interview on September 24 with CNBC, Amir Adnani, CEO of Uranium Energy, said that he is highly optimistic about the future of uranium investing. He believes that the uranium market is finally emerging from an 11-year bear market and is experiencing a renaissance. This newfound enthusiasm for uranium is driven by the growing recognition that nuclear power is crucial in the global effort to achieve carbon neutrality by 2050. As the world becomes increasingly aware of the need to reduce its reliance on fossil fuels and transition to cleaner forms of energy, nuclear power is being rediscovered as a vital part of the solution.

Adnani notes that public opinion polls are now at an all-time high in support of nuclear power, indicating a significant shift in the public’s perception of this form of energy. Furthermore, big tech companies are beginning to take notice of the potential of nuclear energy and are starting to partner with nuclear energy companies to invest in new infrastructure. This influx of capital and expertise is expected to have a profound impact on the industry, driving innovation and growth in the sector. The demand for nuclear-generated electricity is increasing exponentially, driven by the development of data centers and cloud computing. This surge in demand is causing U.S. utilities to extend the life of reactors and bring back previously retired reactors, which in turn is driving up the market for uranium.

However, Adnani also acknowledges concerns about the potential for big tech companies to drive up prices for households using power. This is a valid concern, as the increasing demand for nuclear-generated electricity could potentially lead to a supply shortage, driving up prices for consumers. Nevertheless, Adnani believes that this is a manageable risk and that the benefits of investing in uranium far outweigh the potential drawbacks. He notes that the utilities need to invest upward of $50 billion to keep up with the growing demand for nuclear-generated electricity, which presents a significant opportunity for investors.

The uranium market is expected to experience significant growth over the next decade due to the growing demand for nuclear energy and an increasing need for low-carbon energy sources. The uranium market is poised to play a critical role in meeting global energy demands. With that in context, let’s take a look at the 7 best uranium stocks to buy according to hedge funds.

Our Methodology

To compile our list of the 7 best uranium stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the 9 largest Uranium companies. We then narrowed our choices to 7 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Cameco (NYSE:CCJ)

Number of Hedge Fund Investors: 60

Cameco (NYSE:CCJ) is one of the largest uranium producers globally, with key operations in Canada’s Athabasca Basin, including the Cigar Lake and McArthur River mines. Cameco (NYSE:CCJ) also provides uranium refining, conversion, and fuel manufacturing services, making it a vertically integrated player in the nuclear fuel cycle.

Cameco (NYSE:CCJ) is a significant player in the development of small modular reactors (SMRs) and the expansion of its uranium mining and processing operations. The company owns 40% ownership stake in the Inkai deposit in Kazakhstan, which is the world’s leading deposit of uranium, and provides a significant source for uranium production.

The company’s recent acquisition of a 49% stake in Westinghouse, a global supplier to the commercial power industry, has further strengthened its position in the market. This strategic move has not only expanded Cameco’s (NYSE:CCJ) service offerings but also provided a platform for the company to tap into the growing demand for nuclear energy. The company’s 49% stake in Westinghouse is expected to generate significant revenue and earnings growth in the coming years.

The nuclear industry is is driven by increasing global demand for clean and reliable energy. Cameco (NYSE:CCJ) is well-positioned to capitalize on this trend, due to its diversified business model, strategic partnerships, and expertise in the nuclear fuel cycle. The increasing demand for nuclear energy, driven by government policies to reduce carbon emissions and meet growing electricity needs, is expected to drive up uranium prices.

Cameco (NYSE:CCJ) is likely to benefit from this trend, given its significant uranium reserves and production capacity. Cameco (NYSE:CCJ) expects to deliver 32-34 million pounds of uranium in 2024, representing a 1.5% increase from the previous year. Additionally, the company’s expertise in uranium mining and conversion positions it well to capitalize on the growing demand for nuclear energy. In the second quarter, the company’s stock was held by 60 hedge funds with stakes worth $846.57 million. Driehaus Capital is the largest shareholder in the company with a stake worth $192.62 million as of June 30.

Overall CCJ ranks 1st on our list of the best uranium stocks to buy according to hedge funds. While we acknowledge the potential of CCJ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CCJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.