Enjoy the Coal Train

Hey There Income Hunters,

Mark my words here on the last day of May …

Within a year, coal prices will be up 300% and oil will hit $90.

Long ago, I said the day would come when our leaders would be scrambling to meet the demand of a reopening economy.

Now, all of a sudden, the administration is in love with … nuclear power.

Say what?  

Yes, the Biden team has completely flipped (no surprise to me) on nuclear. The American Jobs plan calls for funding to build advanced reactors and incentives for making current facilities more efficient. 

Better late than never, I guess

This shift creates some great profit opportunities for traders who do their due diligence and find the 2- or 3-bagger returns I expect in the coal and nuclear industries.

In the next 12-months, we will see a massive shift out of growth stocks into basic material, precious metals and value stocks.

Just keep your focus on this graph …

 

It is all relative in the world of investing, and being flexible to a changing environment is essential.

To paraphrase Jimmy Buffet, there’s a bull market somewhere. #IncomeHunters just need to be ready to pounce …

I have a couple of great names for you in the coal and uranium markets, low-priced producers with the potential to 2x or 3x your money.

 

Does Anyone Want to Sell 10 million Pounds of Uranium?

 

The world is short about 10 million pounds of uranium through the end of the decade.

 

China has to double its stated plan to bring at least 60 nuclear power plants online over the next eight years. India needs an additional 25 to 30 facilities.

In the U.S., our lack of uranium has the makings of a national security problem because we aren’t producing our own.

We now have a situation where the anti-fossil fuel policy, and reduced production because of it, is driving natural gas and coal prices higher.

That makes nuclear power much more competitive. This supply/demand dynamic creates an ideal scenario for front-running the institutional purchases.

Think about this, the uranium industry is only worth about $21 billion — that is half the size of Dogecoin. It’s a joke.

You have to have a minimum of 5% of your portfolio in the oil, natural gas, coal and uranium sectors. By my analysis, the upside is 10x the downside.

Uranium Producers

Denison Mines (Ticker: DNN) – DNN is a uranium developer and explorer based in the Athabasca Basin, a region in northern Saskatchewan and Alberta, Canada.

This is the world's biggest source of high-grade uranium, currently producing about 20% of the world’s supply.

DNN’s major project is Wheeler River, which is one of the lowest cost projects currently in development. Reserves in the probable category total 109.4 million pounds, with another 132.1 million pounds inferred.

The company’s other high-grade project is Waterbury. They own 67% of that undertaking, which recently received a positive preliminary economic analysis.

 

The U.S. announced it is considering extending uranium power plant licenses to 100 year. That shift would cause a substantial and long-lasting increase in demand.

So #IncomeHunters have a great opportunity to buy a miner in the early stages of development in an industry with government support.

DNN could be a 10-bagger if you sit with it for three years.

They do offer longer-term options so buying a long-term call and selling short-term calls to collect premium along the way would add more juice while you wait on the big prize.

Global X Uranium ETF (TICKER: URA)

URA offers exposure to a broad range of uranium mining stocks and producers of the nuclear component. These companies have large absolute revenues in the uranium industry.

 

The technical picture offers an excellent entry point as URA has recently broken out with good volume on a monthly chart.

Nuclear energy is clean, scalable and efficient, and with all the revised interest in it globally, I consider URA a potential 5-bagger

The company is a good addition since it offers liquid options and can be traded against a core holding.

 

This Christmas, Coal Will be on Everybody’s List

It’s funny how the “black bheep” of fossil fuels is now in such demand.

That is exactly when you want to get in on a purchase that I think will be at least a 3-bagger.

Peabody Energy Company (TICKER: BTU)

BTU has 3 Different Segments:

 

      • Seaborne Thermal: Composed of Australian thermal coal that is primarily exported to China, India and Japan
      • Seaborne Metallurgical: Hard-coking coal used in steel making.
      • Domestic Thermal: Thermal coal mined in the Powder River basin (Wyoming) and the Illinois Basin. 

Tailwinds from an impending resolution of a trade dispute between China and Australia, along with increased demand in China for coal plants and higher natural gas prices over the next 12-24 months, will be major drivers of higher coal prices.

You have to realize, even though coal is falling in demand in developed economies, it is still growing in developing nations. China is aggressively expanding plant capacity, which generates demand for BTU’s Seaborne Thermal coal going forward.

 

ARCH Resources Inc. (Ticker: ARCH)

ARCH is the coal leader and is on a roll.

The company’s most recent earnings show a nice improvement in financials, and they will be revving up a new mine in Q3. That will stoke growing momentum and higher earnings.

The nice thing with ARCH is they are growing earnings before interest, taxes, depreciation, and amortization (EBITDA) now and as the price of coal rises it will accumulate to their top line.

 

 

ARCH is further along in it’s uptrend and provides a bit more volatility for trading around a core holding.

 

Bring It Home

Keep moving into the asset classes that are hot.

You can see how institutional investors first moved into energy producers, then commodities. There’s been a recent shift into gold and silver and next up is fossil fuels.

With coal and uranium, I like playing them with outright calls or call spreads out as far as possible.

These assets are solid winners in a secular bull market.

When they become overbought you can sell shorter term calls against an outright long-term position…

It’s a short week ahead ending with an important jobs report on Friday. I think it will be a strong number and I have a few trade ideas I’ll share throughout the week.

Until then …

Live and Trade With Passion,

 

Griff

 

 

 

 

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