What are the best uranium stocks? The basic materials sector has been struggling lately, having only posted average gains of 1.9% in the past 12 months. That doesn’t mean that the sector is going to stay this way, and in fact provides an opportunity to follow the oldest mantra in investing: “buy low and sell high”. Today we will be focusing on a precious metal, which has seen its price rise by more than 6.2% over the last month, uranium. The metal’s main industrial use is as fuel in nuclear power plants, providing about 14% of the world’s electricity. Hence, Japan’s recent announcement that it will be restarting its nuclear power plants more than four years after the Fukushima nuclear disaster, and the commitment of the U.S to reduce emissions, which also puts nuclear power in a favorable light, had a positive impact on the metal’s price. Scanning our database, we have come up with the four most popular companies among hedge funds that are focused on the extraction of this metal. Read on to find out who they are.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 60 percentage points since the end of August 2012. These stocks returned a cumulative of 118% vs. a 57.6% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
4. Rio Tinto plc (ADR) (NYSE:RIO)
Investors with Long Positions (as of June 30): 18
Aggregate Value of Investors’ Holdings (as of June 30): $241.11 Million
At the end of March, 16 hedge funds had investments worth $321.76 million in Rio Tinto plc (ADR) (NYSE:RIO). The stock price depreciated by a little over 4% during the June quarter, while it is down by about 20% so far this year. Although Rio Tinto plc (ADR) (NYSE:RIO) is slightly less popular than BHP Billiton Limited (ADR) (NYSE:BHP) as far as hedge fund sentiment is concerned, many analysts actually favor the former, given its discipline, restructuring potential, cheap valuation, and dividend yield, which currently stands at 5.64%. Such analyst firms include UBS and T. Rowe Price. Rio Tinto’s largest shareholder within our database, David Shaw‘s D E Shaw, increased its holding in the company by 14% to about 764,100 shares valued at $13.49 million during the second quarter.
3. AngloGold Ashanti Limited (ADR) (NYSE:AU)
Investors with Long Positions (as of June 30): 18
Aggregate Value of Investors’ Holdings (as of June 30): $585.10 Million
During the second quarter, the hedge fund interest in AngloGold Ashanti Limited (ADR) (NYSE:AU) fell from 21 firms with a total investment of $635.16 million in the company. John Paulson‘s Paulson & Co reduced its stake in the company by 1% to 26.03 million shares during this period. As the name suggests, AngloGold Ashanti Limited (ADR) (NYSE:AU)’s main exposure is to gold, but the company also produces uranium, silver, and sulfuric acid.
2. BHP Billiton Limited (ADR) (NYSE:BHP)
Investors with Long Positions (as of June 30): 19
Aggregate Value of Investors’ Holdings (as of June 30): $146.05 Million
BHP Billiton Limited (ADR) (NYSE:BHP) is involved in producing a wide range of commodities besides uranium including iron ore, coal, oil and gas, copper, and aluminium. Jeffries upgraded the stock today to ‘Buy’ and set a price target of $40 on it, which provides an upside of more than 17% to the current price. At the end of March a total of 17 hedge funds had a total investment of $301.14 million in BHP Billiton, while the stock price slumped by over 12% during the second quarter, so even though the popularity of the company grew in terms of number of hedge funds having it in their equity portfolio, the aggregate investment saw a sharp decline. However, Daniel Bubis‘ Tetrem Capital Management, the largest stockholder of BHP Billiton Limited within our database was bullish on the company, raising its stake by 18% to about 613,000 shares during the second trimester.
1. Cameco Corporation (USA) (NYSE:CCJ)
Investors with Long Positions (as of June 30): 26
Aggregate Value of Investors’ Holdings (as of June 30): $284.56 Million
During the April-June quarter, hedge fund interest in Cameco Corporation (USA) (NYSE:CCJ) grew, as the aggregate investment rose from $248.26 million at the end of March, while the total number of firms with investments in the company remained the same at 26. The stock traded nearly sideways during this period, although it is down by almost 17% year-to-date. One of the world’s largest uranium miners, Cameco signed a deal with India in April of this year which involves satiating the emerging economy’s uranium needs for the next five years to the tune of 7.1 million pounds of uranium concentrate. Moreover, Cameco Corporation (USA) (NYSE:CCJ) also has its fingers in Chinese nuclear power projects, as the Asian country has plans to boost nuclear power’s contribution to its electricity generation to 20% by 2030 from the current level of 2%. Dr. Greg Eckel , who is Senior Vice-President of the investment firm Morgan Meighen & Associates said that Cameco Corporation operates in reliable areas as well, such as the U.S, Canada, Australia, and Kazakhstan. David Iben‘s Kopernik Global Investors increased its stake in Cameco Corporation by 25% during the second quarter to 6.09 million shares.
Disclosure: None
