The quiet commodity that is off the radar
As some investors rush for the exit in certain commodities that have reached all-time highs, such as copper and gold, there is one commodity that has been sitting quietly and off the radar over the last two years.
Now it is starting to garner interest in recent months; the commodity in question is uranium (U308).
For much of 2009 and 2010 it has been hugging $40 a pound, after previously spiking to over $90 a pound back in 2007, when all the news was about China and India building one new nuclear power reactor a month and requiring huge stock piles of uranium to ultimately feed them.
Since then, with the credit crisis and more focus on coal as an immediate source for energy power in emerging economies, uranium seemed to be the unloved commodity amongst the available sources of fuel for energy.
Uranium prices now trade at around $59.50 per pound, up almost 50 per cent in the last three months on rumours that the Chinese are stock-piling the metal again.
Share prices in certain uranium listed stocks are now playing catch-up and with the market's fall over the last few days, might be a chance to purchase stock on weakness, ahead of further revaluations.
The one I am keen to highlight is that of Geiger Counter Limited (GCL):
Geiger Counter is an investment company which primarily invests in uranium related companies, but has the flexibility of investing up to 30 per cent in resource related stocks.
Richard Lockwood, a veteran fund manager, is the investment decision for Geiger Counter via his asset management company CQS.
Investing in Geiger Counter will give you an exposure to overseas listed uranium companies as well as London listed ones, without the requirement of working 24 hours round the clock to find the best uranium investment or worrying about foreign exchange losses.
Some of the company's biggest or well known investments are in Mantra Resources, Uranium One, Paladin Energy, Kalahari Minerals and Cameco Corporation.
The Net Asset Value last week measured at 93p on a diluted basis so the current share price of 85p represents about a 10 per cent discount.
Such a small discrepancy is reflective of the demand for investing in the sector and the high-regard Lockwood is held in within the investment community.
Expect the stock to break through 100p in due course as uranium continues its upward trajectory.
Update
Avanti Communications (AVN) – suggested to buy at 655p, the shares closed yesterday at 642p. Keep holding as the excitement is yet to come on 25 November when the Hylas-1 satellite is scheduled for launch.
Avon Rubber (AVON)– tipped as a buy at 161.5p, the stock closed yesterday at 162p. Its preliminary report is due to be announced on 24 November, when I expect the shares to attract further market attention.
Toumaz Holdings – tipped as a buy at 8.625p, the stock has slipped slightly to 8. No real news to write home about but keep holding for now.
Rurelec - tipped as a buy at 14.25p, it closed at 12.25p yesterday. This was a real disappointment as we had been hoping that the Bolivian government was prepared to settle for its nationalisation of Rurelec's electricity plant before international arbitration proceedings.
Alas this was not the case and Rurelec's lawyers have ordered a notice of arbitration. On the positive side things could actually turn out better as the projections for settlement, if it rules in Rurelec's favour, will possibly be significantly higher than an out-of-court settlement, but this will take time, possibly up to one year before an outcome is known
For the patient I would hang on, but for those who were looking for a fast buck, I would probably make a swift exit and look for pastures new.
Renewable Energy Holdings – tipped as a buy idea at 16.25p, it closed yesterday at 15.75p. It was interesting to note that activist investor Peter Gyllenhammar has announced a declarable stake in the company: not surprising given Renewable's net asset value per share of 36.2p. Hold for now.
Jubilee Platinum – tipped as a buy at 33.75p – it closed yesterday at 29.25p. Cut the position.
Bowleven – tipped as a buy at 177.25p, the stock closed at 266.5p yesterday, a 50 per cent gain, having traded as high as 301p. Keep the stop at 238p but I have high hopes this could be significantly higher if Bowleven can upwardly define the scale of its recent discoveries.
New British Palm Oil – tipped as a buy at 572p, the stock closed yesterday at 800p, a 40 per cent gain. Take profits.
IQE – tipped at 24.25p, the stock closed yesterday at 41.25p, a 70 per cent gain. Keep holding for now while maintaining the stop at 38p.
Tissue Regenix – suggested as a buy at 16p, the stock has slipped to 11p, albeit off the recent lows of 10p. The company needs news-flow to get the stock back above the entry level. Sit tight for now.
Pursuit Dynamics – suggested as a buy at 223p: two weeks ago I suggested selling the original stake at 444p to ensure a risk-free investment. Yesterday it closed at 540p, a 142 per cent gain above the tip price. The stock is scheduled to release its preliminary results on 3 December. Sit tight on the balance.
The material for this report comes from Alpha Terminal. The writer does not hold any shares or derivatives in the above mentioned companies except Renewable Energy Holdings and Bowleven. Some clients of Optiva Securities hold shares in the above mentioned companies.
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