Thoughts on the uranium bull market
Plus: four of my favourite books on investing (in response to a reader)
Just a quick note today following a message from a reader, asking about investment books and the nuclear industry / uranium. (Upon review, it got a bit longer.)
Good morning Rob.
Just a line (and a couple of questions) to say how much I am enjoying your posts; as a sixty something who didn’t do history or economics at school, and trying to get my head around concepts and investments, your book has been a godsend! Great to see someone who writes for the lay person like myself, although I am sure more experienced investors will gain useful insights too. Obviously you are still writing your book, my question is if there are any books you could recommend, written on a similar easy to access format?
Secondly, I see increased ‘noise’ around nuclear power in the financial newsletters and mainstream media. My question is, is this noise justified and is it worth looking at investments in this sector. Obviously it is a large sector with mining, building and other ancillary industries involved, so plenty of opportunities, but for better or worse financially?
I can see that this could be a way out for Governments; a no or low carbon fuel of almost limitless supply of stable baseload power, not requiring the current back-up systems. It would appease the climate ‘saviours’ who would be otherwise inconsolable if fossil fuels were to continue, and would also be acceptable to the vast majority of the public who just want access to plentiful, reliable energy.
I appreciate the above is a huge subject, so perhaps you would rather address it to your subscribers rather than just me? Either way, I really would value your opinion and insight, as I am sure others would.
Many thanks again for a brilliant service, long may you continue!
You can find out more about my investment book here. It's for paid subscribers, although the Dedication and Preface and Chapter Plan are free to all readers. If you think it could be interesting, please consider becoming a paid subscriber (you will also receive stock analyses and updates, and other exclusive content).
OfWealth (i.e. me, myself and I) is entirely supported by subscribers! It relies on paid subscriptions, for which I am very grateful.
I've published eight chapters of the book so far. The last one explained why private individuals cannot win, in the end, at short-term trading. The next will cover the complex and often misunderstood area of risk (as usual, aiming to make this jargon-ridden area as simple to understand and intuitive as possible).
Four recommended investment books
My response to the reader:
First of all, many thanks for your message and I'm glad you find the content interesting and accessible. The aim is always to make complex investment topics easy to understand for anyone without a formal financial training.
That itself is not always an easy task, given all the jargon and mathematical theories used in mainstream investing. All readers are encouraged to let me know in future if I write something that isn't clearly explained. I'm always looking to improve (see the email address at the end).
On the topic of books, what I'm trying to do with mine is, I think, different to most investment books. Or, at least, the ones that I know. See the preface to "Getting a Better Class of Enemy" for an explanation of the other kinds of investment books, and how mine differs.
That said, there are definitely some other good books that I can recommend, and that you may like. These have all helped me to improve my market and investing knowledge in the past.
(You probably won’t be surprised to hear that I also read much more technical financial tomes and research papers from time to time. But I wouldn’t want to impose those on anyone else.)
Simple But Not Easy by Richard Oldfield. Written by a veteran British fund manager with lots of anecdotes / experiences. I think I've read it twice (and my copy is heavily annotated in pencil). The first chapter kicks off going through Oldfield's biggest errors, which he refers to as "howlers". It's rare for someone in the industry to be that honest.
The Outsiders by William N. Thorndike. Stories of successful US CEOs / companies that often went against accepted financial wisdom or fashion at the time, and thus achieved great results for shareholders.
Tomorrow's Gold by Marc Faber. Lots of market history and insights from around the world, such as what happened during various speculative bubbles and subsequent busts. Learning about such things helps to identify both outsized risks, as they come along, and also outsized opportunities for profits. The book is out of print, but you may be able to get a second-hand copy online.
The Intelligent Investor by Benjamin Graham. This is the value investing classic, written by Warren Buffett's mentor. It's fairly long, and a little technical in places. Plus some of the language seems a bit archaic at times (given that it was first published so long ago, back in 1949). But it's still interesting and relevant today, and has been updated somewhat in later editions.
Nuclear power / uranium
There was a recent bull market in uranium and uranium miners, with one big leg up in 2021 and another in 2023. That has now stalled and pulled back a little.
Uranium and the miners can surge in price from time to time. When they do, the profits can be enormous. But, on the other hand, I'm not generally interested in stocks of other participants in the nuclear industry.
Those tend to be vast, diversified industrial companies, which do a lot of other things besides building nuclear reactors (which take many years and a lot of capital to construct), or supplying parts. Or they are diversified power companies, who happen to produce a lot of nuclear energy. Some of the "nuclear energy" funds are dominated by such low return companies.
My own experience with uranium investing has been mixed. I made some good money from a uranium miner in 2021, about 65% over seven to eight months. But I didn't participate in the 2023 bull market. My attention must have simply been elsewhere.
Prior experiences with uranium have not been nearly so good. I held uranium via a fund for many years, between about 2012 and 2017, if memory serves. That was based on convincing assurances from respected commodity experts that the price was going to surge, due to an imminent supply shortage and loads of new nuclear reactors being built in places like China.
In the event, nothing happened and the uranium price continued to drift lower. I have deep wells of patience when it comes to investing, but this tested even mine. In the end I decided the capital would be better invested elsewhere.
If I'd held on until today, perhaps I would have made around six times my money in the end. But that would have taken 12 years to occur, which would test the patience of Job.
But maybe it would have been worth it, since it works out at about 16% a year, at a compound rate of return. However, investing always seems easy with hindsight (and, in any case, I also made some money from that uranium miner in 2021, over a short period).
By and large, and due to past experiences in this general area, it takes a lot to convince me to speculate on commodities, and I take a pretty cautious approach.
It's easy to come up with a compelling story why such and such will go up (and write newsletters about it). But in practice, from what I've seen, it's very hard to get it right. That's even for dedicated, specialised commodity experts (which I am not).
As an example, in 2021 there was a lot of clamour to buy stocks of miners of commodities such as copper and iron ore. Prices have fallen since. Ditto lithium miners since 2022 and silver since mid-2020.
Getting back to today, I'm in two minds about uranium. As explained, I've seen false dawns with this area in the past. And/or I wonder if the big move has already happened. Could the next big move be sharply downwards, continuing the recent trend?
After all, the uranium price basically quintupled between late 2019 and early 2024, from around $20 to $100 per pound (see the chart below). It’s now down to $85. But I haven't done a deep dive recently, so don't have a strong view.
Uranium price since 1988 (US$ per pound)
Source: Trading Economics
If you've been lucky enough to ride the uranium bull market since late 2019, and have big paper profits, you may want to consider reducing your positions. This is simply good risk management practice, to not have too much weighting in one thing. Remember that the higher the uranium price goes, the greater the likelihood that it could drop sharply, and the greater the potential size of that drop.
Taking some risk off the table after big and swift gains, and realising some profit, is never a bad idea. That’s even if the price keeps rising afterwards. It’s about containing risk, and maintaining peace of mind.
One final thought about uranium. If the mainstream media, or the usual suspects in the newsletter world, are making big "noise" about something, then it's probably already too late. Or, at least, near the end of the boom.
That's one of the reasons I like gold at the moment. It's been moving up nicely, but hardly anyone in the mainstream is talking about it. This provides some sort of comfort that it might be early in the process. But none of this is guaranteed. The level of media interest, or not, is only one indicator of many.
If you have a view on uranium or uranium miners, please feel free to email me at the address below. Do you agree with me? Or am I missing something here?
I'll now get back to my deep dive into a new stock that I'm busy with this week. It's of a leading, high-growth US company in the area of cyber security, which is an essential service these days. Look out for that analysis next week (for paid readers). That is, unless I unearth something serious buried in the financial footnotes, that puts me off. (You can find past analyses here.)
Please send comments or questions to the email shown below.
Until next time,
Rob Marstrand
email: ofwealth@substack.com
The editorial content of OfWealth is for general information only and does not constitute investment advice. It is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.