Cameco + BHP Billiton...as go the Generals, so too
Should the Foot Soldiers
Thursday October 4, 2007
We know that everybody here is familiar with the investment
thesis regarding uranium. Our position has been and continues to be that the
investment thesis remains intact. As additional support for our current bullish
stance on the uraniums we draw upon our years of stock market investment
experience and observations that we have learned along the way.
At the inception of most bull market moves, regardless of
industry, investment capital moves into the leaders because by definition they
are usually the largest and best capitalized companies and their equity is in
most cases highly liquid. In our case, that means Cameco, specifically as a pure
play, and BHP Billiton, more generally. As you recall, they were the main
beneficiaries (speaking in investing terms, not operational) when the uranium
price first began to increase. We are pleased to note that our work shows the
price of Cameco has bottomed and has recently broken through both its 50-day and
200-day moving averages. In recent trading, the stock has since fallen below the
200-day level, but remains nearly directly between the two as we write. BHP
Billiton also hit a recent high in Australian trading recently.
This has bullish implications for the emerging leaders and
junior exploration companies that we follow. Just as the large industry leaders
are the main initial beneficiaries, at the start of new bull markets so too are
they the initial beneficiaries after those violent periodic bull market
corrections (such as the one we just experienced). We think the price action of
Cameco and BHP Billiton are giving us the “all clear signal” for all stocks. As
an aside, although we use Cameco as a “beacon” or proxy for the uranium market
in general, we remain wary of further delays at Cameco's Cigar Lake Mine.
Therefore we continue to prefer those uranium companies moving forward with
bringing production online and moving forward with plans for projects to come
online in the near future.