Another Reason to Invest in Uranium
Wednesday, April 05, 2006

Many of you have most likely heard of Bill Gates and Warren Buffett taking large positions in the Euro and shorting the US$. It is apparent that these to brilliant investors see a correction (fairly large I'd say, or else they would not be taking part in this trade) in the price of the US$ on in world terms. Although I am not in the same boat as these two investors in the belief that the Euro will be a better investment than other world currencies, I do agree with the general thesis. The US $ will inevitably have to come down as we run such high “twin” deficits (our domestic budget and with our trading partners) and are forced to earn our money back. Also our Federal Reserve is due to at a minimum slow the pace of our interest rate increases, which will take a lot of the strength out of the US$ versus other currencies.

Now one interesting way to make this same trade as America's richest billionaires, and hopefully make more money doing it, is to invest in foreign stocks. Now these stocks could go down, thus ruining any gains in your currency play, but it is a risk worth taking in my opinion. So, one way to play this is to buy Canadian and Australian uranium producers on their homeland exchanges. This will allow you to convert your expensive US$ (remember, our thesis is that they are expensive now and will be worth less against these currencies in the future) into Canadian and Australian $s. Now it appears Uranium is in a bull market that at this point seems poised to run for at least a decade with China and the rest of the world's plans to build nuclear power plants to fuel their energy demands. Thus, we can arrive at the conclusion that we can make money off of the falling US$ as well as the appreciation of the foreign stocks! This is better than what the Billionaires are doing, because as the uranium stocks appreciate in value, they are worth more in the foreign currency that they trade in. As the US$ decreases, as we think it will, your foreign currency then becomes worth more in US$ terms.

This is almost like a currency trader taking all of his gains from a trade, and reinvesting it. Think of it like this, if you were to have bought Google at $98 when it had its IPO, and all the way up used margin to reinvest your paper gains to get more stock, not only would you have your gains from the original shares, but from the reinvested shares as well. Those actions would have added a large % to your overall gain, possibly even doubling it. This trade in the foreign uranium producers can do the same thing as they will surely rise in price as the general investing public realizes the shortage of this soon-to-be vital resource, and stampedes into the market. At the same time if the US$ is falling against the foreign currencies of Australia and Canada, then you will be pocketing the currency gain when you finally decide to take your profits.

Now should for some reason the US$ rise, then the worst case scenario is that you lose a few % points off of your gain in the stock to the currency convesion after you have sold your position. This is a risk that I am more than willing to take, as well as one that has a potential to deliver you better gains that 'The Billionaire Club'.

Recently some of our recommendations have pulled back a bit, and in some cases we have ended right back where we started...sad, but we realize that we must not sell, stay our course, and continue to accumulate shares in these companies that have the promise to deliver huge returns to our portfolios.-theinvestar's Portfolio

Past Recommendations 

CWPC...........$4.90..........$6.88........+40.4% *CCJ...............$35.91........$39.21......+11.14%

IUCPF..........$5.45...........$5.54........+1.7%

PALAF.........$2.77...........$3.59........+22.84%

STHJF.........$2.25............$2.32........+3.1%

CVVLF.........$.449...........$.58..........+29.18% *TUEFF.........$2.11...........$2.58........+22.78%

UREGF........$1.73...........$1.75........+1.15%

**Denotes a company in which I own stock in before this article has been posted on the blog. We are proud to point out that our Energy Portfolio is up 18.9% in less than a month. Quite impressive, and we hope that this continues in order to prove correct our thesis regarding the energy sector. Happy Stock Picking...