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Ur-Energy Inc. (URG): Why Are Hedge Funds Bullish on This One-Dollar Stock Now?

We recently compiled a list of the 10 Best One-Dollar Stocks To Buy Now. In this article, we are going to take a look at where Ur-Energy Inc. (NYSE:URG) stands against the other one-dollar stocks.

The upward trend in the stock market has resumed, supported by strong first-quarter and second-quarter results that have relieved investor concerns about inflation. The US economy had a very strong year in 2023. Economic activity increased steadily, job creation was high, unemployment was low, real earnings rose, and inflation declined. Furthermore, the Federal Reserve maintained high interest rates throughout this time in an attempt to control inflation. June recorded a market increase of more than 10%. The large-cap market of the 500 biggest companies has already surged over 17% so far this year as analysts look forward to reduced interest rates in the second half of 2024, along with higher earnings growth and lower inflation.

Historically, since 1928, July has been the strongest month of the year for stocks in terms of performance. The market rose by 1.7% in July. Given that the market posted gains in May and June despite notable economic uncertainty, investors remain bullish that the market can sustain its positive trend.

In a May speech to the Foreign Bankers’ Association, Federal Reserve Chair Jerome Powell recognized the difficulty of bringing inflation down to the desired level. Powell stated that it could be essential to keep interest rates at their present levels for a longer period of time. Interest rates have been fluctuating between 5.25% and 5.5% since July 2023.

Amid concerns over an impending recession brought on by higher interest rates, the US labor market still remains stable. According to the Labor Department, the US economy created 175,000 new jobs in April, although this was less than the 240,000 jobs that economists had predicted. The US labor market maintains a low unemployment rate of 3.9%, while US wages have risen 3.9% YoY. Nonetheless, recession fears are maintained by the historical recession predictor, the inverted U.S. Treasury yield curve, and the New York Fed’s model, which projects a 50% chance of a recession within the next 12 months.

The second quarter of 2024 saw a gain of more than 3% in the US stock market. Under the hood, tech companies continued to lead the artificial intelligence trade, which showed no signs of slowing down throughout the quarter. One striking trend in the stock market this year has been the outperformance of the biggest companies. The large-cap market of the 500 biggest companies gained 4.4% in Q2, bringing its 2024 return to more than 15%. By comparison, the small-cap market had a decline of 3.3%, resulting in a reduced 2024 return of 1.6%.

With over half of 2024 already gone, the US stock market is expected to see significant increases for the second year in a row.

According to DataTrek Research co-founder Nicholas Colas, the 2024 stock market surge is about more than just this year; it also includes the outlook for 2025 and 2026. Colas stated:

“Markets are convinced that U.S. large cap companies will see many years (not just one) of improving earnings. Earnings for 2024 only have to come through slightly better than last year, and nothing occurs on the macro side (economic growth, geopolitics) to derail further earnings growth in 2025 and 2026.”

Investor confidence is supported by historical trends and recent earnings performance. The stock market does well in election years, according to historical statistics, especially when the president is serving his first term, as is the case with Joe Biden.

Methodology:

In this article, we first used a stock screener, Finviz, to list down all stocks trading under $1.5 and above $0.85 (as of the writing of this article) with over 40% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested. We only considered stocks that received “buy” or “strong buy” recommendations from analysts.

Why are we interested in the stocks that hedge funds pile into? 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)

Aerial view of the vast landscape of Great Divide Basin, Wyoming.

Ur-Energy Inc. (NYSE:URG)

Number of Hedge Fund Investors: 18

Ur-Energy Inc. (NYSE:URG) is involved in the purchase, exploration, development, and operation of uranium mineral properties. Ur-Energy (NYSE: URG) is a strong competitor in the uranium industry, with a unique opportunity to capitalize on the current state of the market right now. Given its strategic emphasis on in-situ recovery (ISR) uranium mining in the United States, the company is pioneering an expanding industry that is being pushed by both supply limits and growing worldwide demand. Having been established in 2004, the firm has been producing uranium for little more than a decade.

The increasing recognition of nuclear energy as a dependable, clean substitute for fossil fuels has propelled a notable upswing in the uranium market. The IEA expects global nuclear generation to be almost 10% higher in 2026 compared with 2023. Since starting operations, the company has produced and packed about 2.7 million pounds of U3O8 from Lost Creek, while 2.2 million pounds per year are allowed for the processing plant, Ur-Energy takes advantage of this trend. This plant, in operation since 2013, demonstrates the company’s capacity to continue producing at a low cost and turn a profit despite changes in the price of uranium. The company holds interests in 12 projects located in the United States.

Analysts have given URG a “strong buy” rating. The average Wall Street analyst price target for Ur-Energy Inc. (NYSE:URG) is $2.65, which presents a 97.03% upside potential from the current price of $1.35. According to Insider Monkey’s Q1 2024 database, 18 hedge funds made investments in this company. With 14,584,181 shares worth $23.33 million, Daren Heitman’s Azarias Capital Management held the largest stake in the company.

Significant advancements have been announced by the firm in its Q2 2024 reports. Despite guiding to the lower end of their 2024 target of 550,000 to 650,000 pounds, Lost Creek operations showed a quarter-over-quarter rise in output, with 70,679 pounds collected, 64,170 pounds dried and packaged, and 70,390 pounds transported.

The engineering and construction work at Shirley Basin is progressing, and the placement of monitor wells is proceeding as planned. The CEO, John W. Cash, stated in his latest letter to shareholders that in Q1 2026, Ur-Energy hopes to have the Shirley Basin project operational, tripling its operations and increasing capacity to 2.2 million pounds annually. The strategy of the satellite plant will reduce expenses and improve profits, resulting in an increase in cash flow.

With a gross profit margin of around 32%, the company made $4.6 million in revenue by selling 75,000 pounds of U3O8 for $61.65 per pound. Hence, revenue visibility is provided by recent contracts and sales agreements, with an anticipated increase in output. Ur-Energy projects $33.1 million in sales revenue for 2024. In 2025, 730,000 pounds of U3O8 will be delivered as part of future obligations; additional agreements will guarantee up to 100,000 pounds a year between 2026 and 2029. These commitments, together with projected price rises for uranium, put Ur-Energy in a favorable position for increased revenue growth and shareholder value.

URG celebrated an incredible yearly revenue increase, surging by 92947.37% to 17.68 million from $0.02 million in 2023. Ur-Energy’s existing manufacturing base in the United States, low operating costs, and capacity to rapidly scale up supply put it in a favorable position to profit from this market. With $61.3 million in cash and cash equivalents as of Q2 2024 and no debt at the end of the quarter, URG continues to maintain a strong balance sheet. Since 2022, the company has signed six multi-year sales contracts, and management is still aggressively looking to sign more deals. Solid demand for US-sourced items is expected, potentially at a premium over foreign materials.

Ur-Energy is a reputable, low-cost manufacturer with an appeal to US jurisdiction. This means that the Ur-Energy Company has demonstrated its capacity to manufacture uranium at a cheap cost, enabling it to maintain a profit even in the event that uranium prices decline. With an average cost per pound sold of $28 and an average price per pound sold into term contracts of $60.45 over the final two quarters of 2023, the average gross profit per pound sold came to $32.41, with an average gross profit margin of about 54%. Ur-Energy’s U.S. assets are also appealing to consumers looking for dependable domestic uranium sources in the face of supply chain issues, which makes its production even more appealing. This is especially true in light of the current international conflicts affecting Russian uranium supplies.

The operational difficulties that come with scaling up production and outside factors that affect uranium prices and market dynamics are among the risks. Ur-Energy’s potential as a strategic investment in the nuclear energy sector is highlighted by its proactive approach to handling risks and utilization of its operational strengths.

In summary, for investors looking to gain investment in the uranium industry, Ur-Energy is an excellent pick. Ur-Energy has the opportunity to take advantage of the rising demand for nuclear energy due to its sound operations, good financial health, and strategic positioning. This presents significant long-term growth potential in the clean energy industry.

Overall URG ranks 7th on our list of the best one-dollar stocks to buy. You can visit 10 Best One-Dollar Stocks To Buy Now to see the other one-dollar stocks that are on hedge funds’ radar. While we acknowledge the potential of URG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than URG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.

Disclosure: None. This article is originally published at Insider Monkey.

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Top Gold Stock to Watch In 2024

Precious metal gold finished 2023 at $2,062.40 per troy ounce, gaining 13% for the year after hitting an all-time high of $2,135.39. This was the highest annual close on record.

Gold prices surged in the last few months of 2023 after a powerful rally was sparked by central bank purchasing and mounting investor interest. Central bank demand, primarily from EM institutions, was a significant contributor: which added an estimated 15% to gold’s annual performance.

Fed interest rate cuts and falling U.S. real yields will once again become the key drivers behind gold prices in 2024.

What are experts predicting?

  • JPMorgan has said gold will peak at $2,300/oz in the third quarter of 2025.
  • Sean Casterline, the president and senior portfolio manager for Delta Capital Management has said: “We expect gold to move higher and be one of the market-leading sectors for 2024.”
  • The World Gold Council outlined its 2024 outlook, the possible scenarios for the global economy in the year ahead. The most probable outcomes—either a soft economic landing or a recession—each would support gold prices moving higher. “This should encourage many investors to hold effective hedges, such as gold, in their portfolios,” the council said.

The gold market has outperformed many key asset classes over several periods. The metal is well positioned in a period of low interest rates and political, economic, and social uncertainty. It also offers a unique correlation with the broader equity market in different return scenarios and experiences less volatility than many markets.

Click to read the full report on the top gold stock to watch in 2024…