WallStreetBets Nuclear Update: Are Nuclear Stocks Poised For Liftoff After COP26?

In September we wrote about how the WallStreetBets crowd had discovered nuclear energy and uranium stocks and that there were some good reasons, beyond simple speculation, for their rise.

Well, nuclear stocks and uranium continue to have a banner year.

Is it still for real?

We update our thesis.

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Nuclear stocks continue to be en fuego as does raw uranium. Uranium continues to trade in the high $40s per pound and has even touched $50 at one point last week.

The catalyst continues to be individual traders who are flocking to the new Toronto-based trust that buys physical uranium for every dollar of inflows.

• The Sprott Physical Uranium Trust now holds over 32 million pounds of Uranium. This is over 20% of the world's annual consumption.

This has led to a tightening of the market and also brought out imitators that are adding fuel to this fire.

• One the main reasons for this most recent leg higher was when the world's largest producer, Kazakhstan, launched its own physical uranium fund with the plan to buy and store around $500 million of the raw material in the coming years.

The hope is that the clients for the fund run by Kazakhstan's state producer - Kazatomprom - will be large institutions and money managers and fewer retail investors.

After over a decade of excess supply and moribund mining and exploration, the belief is rising that a new cycle of investment in nuclear energy could fuel a new bull market in the equities, the commodity and even new forms of financial assets like these trusts.

Uranium has a long way to go back to its heyday. You can see why people might be getting greedy.

For context, there is a long way to go here.

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The only problem with all of this excitement is that there is precious little evidence that a new structural bull market will occur any time soon.

Nuclear energy remains largely a forgotten concept at the COP26 Climate Conference in Glasgow.

• It is undoubtedly true that nuclear energy could greatly assist in the transition away from fossil fuels but it requires the political will to do so. At present, nuclear remains taboo for nearly all major Western countries (except for France!)

• Nuclear industry groups were even excluded from the conference itself and there is very little likelihood that the conference will come out any major new initiatives.

You also need existing nuclear utilities to buy more of the raw commodity if this new bull market will be sustained.

• There is some evidence of that occurring but in general the reason uranium has been so shockingly low is that the world has plenty of producers and not enough demand.

As a result, what you are seeing is really the rise of a speculative mania rather than an actual structural bull market as sentiment shifts about a key industry.

This could change. Many of the retail investors are not wrong whatsoever. There is an eminent case to be made that nuclear power will be critical in the decades ahead if humanity is going to tackle the climate crisis with any seriousness.

It just might be a case of timing rather than the actual thesis and yet timing is everything, of course.

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One last thought:

It might not be getting the attention it deserves either in online chat rooms or some of the more excitable media pieces but it is worth keeping front of mind but, if retail excitement ebbs, - or simply moves elsewhere - then those same physical trusts may start to dump their product on the market.

Every seller will be more of last year's uranium coming into supply this year's market.

Hence the critical need for Sprott's fund to have asset managers and other institutions be the vast majority of owners. They know that the current buyers are anything but long term investors. Retail traders trade. That is what they do.

What goes up can also come down - and quickly.

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