Uranium Stocks Are Red Hot After Recent Deals
China, Russia, India, and a host of other nations apparently did not get the memo about the evils of nuclear energy. As Japan and Germany are moving to do away with nuclear power for their energy needs, others are doubling down on the uranium-based source of electricity. In a world where demand for energy keeps rising, it will take much more than one accident caused by a natural disaster, like that at the Fukushima nuclear power plant in Japan last year, to produce a significant departure from nuclear power.
While fracking has natural gas in fashion at the moment, nuclear power never fell out of style, despite the negative publicity from Fukushima, Chernobyl, Three Mile Island, and other mishaps over the decades. For countries that must import energy, nuclear power has too many advantages to shun. Uranium, its source material, is abundant. It is competitive in costs with other forms of energy, particularly in Asia where natural gas is five times more expensive than in the United States. Nuclear power also produces less waste and has a lower environmental impact than the other forms of fuel, too.
So compelling are these factors that energy-importing nations aren't the only ones increasing their reliance on nuclear power. The United Arab Emirates, a Middle East oil exporter, just signed a contract with Russia to supply it with uranium. As a member of OPEC, the less oil that the United Arab Emirates requires for domestic oil needs, the more it can export to earn foreign exchange.
Other nations are moving in that direction, too. China has a massive nuclear industry in the works, with 40 nuclear reactors operating or under construction in the People's Republic. Though coal currently supplies about 80% of the electric power in China, it is harmful to the environment, and potentially lethal to workers. Almost 2,000 Chinese coal miners died last year, in the world's deadliest mining industry. By 2020, Beijing wants nuclear power to generate 80 gigawatts of power, more than six times the present amount. India wants nuclear power to provide one-quarter of its energy by 2050.
Build it and they will come
Companies in all areas of the sector should continue to benefit from this global demand. Uranium stocks such as USEC , Uranium Resources , and Uranium Energy red-hot in recent market action. Those that have been very active in building nuclear power plants such as General Electric , Foster Wheeler , and Fluor will profit, too. General Electric makes parts for the nuclear reactors. As heavy construction companies, both Foster Wheeler and Flour provide engineering and construction services for the nuclear power industry.
As the table below shows, the last month has been bullish for companies in the nuclear power industry due to the announcement of deals involving Russia, the United Arab Emirates, India, and Canada.
Share Price Performance for Past Month
Share Price Performance for 2012
What to buy to power a Fool's portfolio?
General Electric, Fluor, or Foster Wheeler are the most suitable stocks for a Fool to invest in nuclear energy for the long term. Each will gain from work in the nuclear power industry, but all have significant operations in other sectors to provide diversity in earnings.
In contrast, uranium stocks such as USEC, Uranium Resources, and Uranium Energy are volatile "one-trick ponies." There are simply too many politicians in this world playing to popular sentiment by capitalizing on recent events to invest in nuclear power, by itself. When politicians start demonizing the industry again (and it will happen), Fools get paid to wait for a return to sensibility with a 3.14% dividend yield from General Electric, and a 1.4% dividend yield from Fluor.
As the nation moves increasingly toward clean energy, one company in this space that is perfectly positioned to capitalize on having the largest nuclear fleet in North America is Exelon. This strength combined with an increased focus on renewable energy, along with its recent merger with Constellation, puts Exelon and its best-in-class dividend on a short list of top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.
The article Uranium Stocks Are Red Hot After Recent Deals originally appeared on Fool.com.Jonathan Yates has no positions in the stocks mentioned above. The Motley Fool owns shares of Fluor and General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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