Investing

Is now the time to invest in uranium stocks?

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  • Mar 1st, 2024 8:45 pm
Member
Jan 19, 2013
275 posts
53 upvotes
Toronto
TranscendentExp wrote: Timing on this could not have been better for this. NXE up to 1.93 now. OP, are you still going to hold or lock in the profits?

I'm holding majority of my share profits for 3 years. I might sell 1000 shares soon to invest in physical gold . I found out yesterday that Nexgen is undervalued right now. They are actually worth 3 times the amount they are now. It's possible they could be worth $3-6 at the end of this year.

Here's a good radio podcast about Nexgen and uranium. He basically mentioned a lot of things I've researched about.

http://youtu.be/COkcSQQMkhE
Member
Jan 19, 2013
275 posts
53 upvotes
Toronto
Honestly this stock is like cash for life. I made $900 in one day lol. I know I shouldn't be greedy but I have to stick to my 3 year plan. Saving for a wedding.

The only thing can stop my portfolio is a market crash now (praying that this doesn't happen..).. I'm +120.18% profit now. It's a bit surreal but that's risk of a concentrated commodity portfolio.
I think we are at complacency stage right now in the market this year. Wallstreet Psychological cheat sheet.
Deal Addict
Jun 15, 2012
2837 posts
1011 upvotes
Saskatoon
Uranium ore abundant in earth core
Germany and Japan phasing out their nuclear reactors

Who knows in three years this stock might cost what is SUNE now

I would fix the profit
Deal Fanatic
Nov 9, 2013
5882 posts
7460 upvotes
Edmonton, AB
NakNak wrote: Honestly this stock is like cash for life. I made $900 in one day lol. I know I shouldn't be greedy but I have to stick to my 3 year plan. Saving for a wedding.

The only thing can stop my portfolio is a market crash now (praying that this doesn't happen..).. I'm +120.18% profit now. It's a bit surreal but that's risk of a concentrated commodity portfolio.
I think we are at complacency stage right now in the market this year. Wallstreet Psychological cheat sheet.
Playing penny stocks to save for a wedding? Sounds like a plan for success.
Deal Addict
Jun 15, 2012
2837 posts
1011 upvotes
Saskatoon
What is P/E ratio of nexgen ? Could not find it

Any thoughts on Cameco ?
Jr. Member
Nov 19, 2015
120 posts
22 upvotes
ukrainiandude wrote: What is P/E ratio of nexgen ? Could not find it

Any thoughts on Cameco ?
Nexgen has no PE because they don't have profit.
Sr. Member
Jul 17, 2013
584 posts
95 upvotes
Greenwich, CT
pulkit10 wrote: Sounds like a good idea to me. I've used the same principle in buying my oil holdings and am satisfied with their course.

It would be helpful to a)determine what is the natural price of the commodity and b) how much cash can the company generate (or loose) even in adverse conditions?

I'm unfamiliar with uranium so I'll use oil. To me, the natural (or real) price of oil is closer to $60-70 as this is how much it would cost to ideally supply the world with 10 million barrels of oil a day. This includes operational cost, capital expenditure and any reserve replacements. Uranium miners will have a similar cost structure.

For the second condition, I bought CNQ and SU a while back as these two companies have projects that produce high grade synthetic crude at low prices. Even in a very adverse environment (like this one) they can still eek by with a small profit or a contained loss.

This sounds like the best way to invest in commodities to me. Buy quality producers when no one else wants them.
If the goal is to buy not just sustainability, but also value, then wouldn't CNQ & SU be the wrong choices? Neither are priced at a discount.

Giving them their historical multiple on CF or debt adjusted CF, both are priced as if oil is at $60.
Sr. Member
Jul 17, 2013
584 posts
95 upvotes
Greenwich, CT
ukrainiandude wrote: Uranium ore abundant in earth core
Germany and Japan phasing out their nuclear reactors

Who knows in three years this stock might cost what is SUNE now

I would fix the profit
Please do some proper research before dishing out advice. Significant deposits of high-grade uranium deposits are found ONLY in the Canadian Athabasca basin.
Deal Addict
Sep 20, 2014
1201 posts
435 upvotes
Calgary, AB
TranscendentExp wrote: If the goal is to buy not just sustainability, but also value, then wouldn't CNQ & SU be the wrong choices? Neither are priced at a discount.

Giving them their historical multiple on CF or debt adjusted CF, both are priced as if oil is at $60.
Currently, yes. But over the last two years, you would have been afforded several great opportunities to accumulate either (CNQ went down to 21 I think? And SU wasn't too far off). The same is true of supermajors like XOM and CVX.

They certainly won't stoop as low as less well off producers but you also have to account for the risk you're taking on when you buy a Husky as opposed to a CNQ. So the question really is, is it better to buy a mediocre company at a very cheap price or a good company at a mediocre price? I prefer the latter because the price of oil is an unknown. I think it'll fluctuate wildly for a few years to come or stay below $50. At those levels, I'm very comfortable with owning a name like CNQ.
Sr. Member
Jul 17, 2013
584 posts
95 upvotes
Greenwich, CT
pulkit10 wrote: Currently, yes. But over the last two years, you would have been afforded several great opportunities to accumulate either (CNQ went down to 21 I think? And SU wasn't too far off). The same is true of supermajors like XOM and CVX.

They certainly won't stoop as low as less well off producers but you also have to account for the risk you're taking on when you buy a Husky as opposed to a CNQ. So the question really is, is it better to buy a mediocre company at a very cheap price or a good company at a mediocre price? I prefer the latter because the price of oil is an unknown. I think it'll fluctuate wildly for a few years to come or stay below $50. At those levels, I'm very comfortable with owning a name like CNQ.
I wouldn't buy Husky either, but that's not a name that's fighting for anyone's capital right now

I'm talking extremely low cost producers with good balance sheets (many of them better than SU and CNQ) that have strong growth potential and many of which have fallen farther than the big names: ARX, PEY, NVA, PPL, VET, WCP, TOU
Deal Addict
Sep 20, 2014
1201 posts
435 upvotes
Calgary, AB
TranscendentExp wrote: I wouldn't buy Husky either, but that's not a name that's fighting for anyone's capital right now

I'm talking extremely low cost producers with good balance sheets (many of them better than SU and CNQ) that have strong growth potential and many of which have fallen farther than the big names: ARX, PEY, NVA, PPL, VET, WCP, TOU


Oh, of course. If the balance sheet and operational cost agree with your thesis, definitely buy them. I already own 2 oil companies so I'm not interested in buying anymore but you could easily make a strong case for a few companies on that list. CNQ represented a huge bargain for me when I bought it while SU has the added downstream sector that I was getting for peanuts. And yes, while it is true that proportionally, you'll have some smaller producers with better balance sheets, in terms of overall strength, it's hard to beat these two. Take TOU, for example. Roughly 88% of it's production is natural gas (and some condensates) and plant, property and equipment represents $6.7 billion of $7.6 billion of its assets. So yes, theoretically TOU has a proportionally stronger balance sheet but it also is more sensitive to price fluctuations and will have to rely more on share selling/bank debt should it run into trouble. CNQ/SU, thanks to their size, don't have these problems. So that was my reasoning in going with these two names as opposed to a TOU or WCP.

I'm not too familiar with PEY and NVA personally and Pembina is a mid-stream/pipeline company but think highly of Arc, WCP and TOU. I have personally worked with TOU and they are exceptional in their operations. The management is made up of a team of ex-Shell employees that have ran 3 successful oil companies (2 of which were sold off to Shell for a handsome profit). So in my opinion, if the price makes sense for you and the numbers add up, you can't do wrong with a name like that. I just focus on the operational costs and balance sheets and if that makes sense to me, I am a buyer.
Sr. Member
Jul 17, 2013
584 posts
95 upvotes
Greenwich, CT
pulkit10 wrote: Oh, of course. If the balance sheet and operational cost agree with your thesis, definitely buy them. I already own 2 oil companies so I'm not interested in buying anymore but you could easily make a strong case for a few companies on that list. CNQ represented a huge bargain for me when I bought it while SU has the added downstream sector that I was getting for peanuts. And yes, while it is true that proportionally, you'll have some smaller producers with better balance sheets, in terms of overall strength, it's hard to beat these two. Take TOU, for example. Roughly 88% of it's production is natural gas (and some condensates) and plant, property and equipment represents $6.7 billion of $7.6 billion of its assets. So yes, theoretically TOU has a proportionally stronger balance sheet but it also is more sensitive to price fluctuations and will have to rely more on share selling/bank debt should it run into trouble. CNQ/SU, thanks to their size, don't have these problems. So that was my reasoning in going with these two names as opposed to a TOU or WCP.

I'm not too familiar with PEY and NVA personally and Pembina is a mid-stream/pipeline company but think highly of Arc, WCP and TOU. I have personally worked with TOU and they are exceptional in their operations. The management is made up of a team of ex-Shell employees that have ran 3 successful oil companies (2 of which were sold off to Shell for a handsome profit). So in my opinion, if the price makes sense for you and the numbers add up, you can't do wrong with a name like that. I just focus on the operational costs and balance sheets and if that makes sense to me, I am a buyer.
Hm. Not sure where you were going with the comment on property, plant and equipment? Unless it's cash (good) or goodwill (bad), I really don't care what their asset mix is. Balance sheet strength is mostly evaluated based on debt to cash flow and debt to equity. TOU handily beats CNQ on both those fronts. CNQ's debt is actually insanely high vs their cash flow and there's some risk that ramp up of their Horizon project may not go as smoothly as planned. I believe CNQ is a good buy too, but only because I think Horizon ramp up will be fine, certainly not because of their balance sheet, which is quite stretched at the moment.
Deal Addict
Sep 20, 2014
1201 posts
435 upvotes
Calgary, AB
TranscendentExp wrote: Hm. Not sure where you were going with the comment on property, plant and equipment? Unless it's cash (good) or goodwill (bad), I really don't care what their asset mix is. Balance sheet strength is mostly evaluated based on debt to cash flow and debt to equity. TOU handily beats CNQ on both those fronts. CNQ's debt is actually insanely high vs their cash flow and there's some risk that ramp up of their Horizon project may not go as smoothly as planned. I believe CNQ is a good buy too, but only because I think Horizon ramp up will be fine, certainly not because of their balance sheet, which is quite stretched at the moment.
I think it's important to consider the asset mix here too. When you're looking at a company that can ward off debt being called in, you're looking at two things: current assets and net cash flow. The former decides how much they can immediately raise and the latter decides how much cash they can get through operations in the short term. Or consider a company that is close to bankruptcy - how would you compute the liquidation value here?

Items like inventory, plant, property and equipment are highly subjective in value because they have niche uses. Consider an upgrader unit that CNQ just spent $250 million on. If it were to go into bankruptcy proceedings tomorrow, how much do you think it'll fetch? I think maybe a tenth of the value. The same is true of property designed by a company just for its specific use. All these items are carried on their stated value in the balance sheet but what are they really worth? For this reason, I choose to focus on current assets (cash, receivables and short term investments) when evaluating a balance sheet. I think this is a far better indicator of balance sheet strength than any other ratio.

That said, your point regarding the debt/cash flow ratio is equally valid (and CNQ is certainly worse off there). However, this ratio has its own limitations and those should be kept in mind. Cash flow can be fickle when the company is a) spending heavily or b) liquidating heavily.

But that's why ultimately it's the price of the company that really matters. If CNQ has $31 billion in debt and can be reasonably expected to earn $4 billion in cash, what price would you pay? If the current quotation is much lower than this value, buying it makes sense. The same logic should be applied to TOU. You already know that it is a strong company with a great balance sheet, but what price would you pay for it, having read only the balance sheet/income statements?

I'm not too concerned with the Horizon projects. They might have a hiccup or two there but they'll manage given that they still have lots of financial muscle (still no layoffs or cuts) compared to other producers of their size. I'm more concerned with the Kirby projects and how they'll materialize because that'll decide how the company is doing 5-6 years down the road.
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Nov 13, 2008
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pulkit10 wrote: STUFF.
What are some good websites (or books) I can read to learn to value companies properly?
˙dlǝɥ ɹoɟ ǝɯ WԀ oʇ ǝɯoɔlǝʍ lǝǝℲ ˙spɹolɹǝʌO pℲɹ ʎɯ ɟo ǝɔᴉʌɹǝs uᴉ ƃuᴉʇɐɹǝpoW ʎlᴉddɐH
Sr. Member
Oct 31, 2006
735 posts
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NXE down 5% today, still talk of it going $2+. What is everyone's opinion.
Deal Addict
Sep 20, 2014
1201 posts
435 upvotes
Calgary, AB
EmperorOfCanada wrote: What are some good websites (or books) I can read to learn to value companies properly?
To do that, I think it's best to understand the fundamental numbers being used. Valuing companies isn't all that different from valuing a person. If you had the chance to invest x amount of dollars in a person in exchange for 10% of their yearly earnings, what things would you look at? Things like how much debt they have, what kind of debt they have, how much is the take home pay, how much liquidity does one have or how much is the net worth?

So things like operational earnings, net cash flow, net book value, liquidation value aren't all that different. All the multiples used today are based off of these basic numbers and if you understand what these numbers mean, everything else will fall into place by itself.

I recommend the following:
Interpretation of Financial Statements by Benjamin Graham - short, simple and to the point; it'll introduce you to all the basic numbers in a very easy way
Security Analysis by Ben Graham
http://www.investopedia.com/terms/c/cashflow.asp - Just look up any other term on Investopedia

Optional extras:
http://ocw.mit.edu/courses/sloan-school ... ure-notes/
http://pages.stern.nyu.edu/~adamodar/

Focus on the basic building blocks and understand them well. Don't get too confused or intimated by the plethora of multiples used by MBA graduates - they mean little in the grand scheme of things.
Deal Fanatic
Nov 9, 2013
5882 posts
7460 upvotes
Edmonton, AB
EmperorOfCanada wrote: What are some good websites (or books) I can read to learn to value companies properly?
The Intelligent Investor helped me the most with valuation. Basically, in a nutshell, Graham says attractive valuation is a PE less than 15 and a P/E x P/B less than 22.5. Other modern valuation techniques are based on Price / Sales ratio as well, but I don't know much about that quite yet.

Basically my quick and dirty valuation method is 1) Figure out 5 or 10 year average trailing P/E and use that to compare it to the current P/E (i.e. if trailing P/E is 15 and current P/E is 10 then in my opinion the company is about 33% undervalued. 1- (10/15).The second is I'll then compare P/E x P/B to see if the Graham Criteria is met.

In all honesty not every purchase I make meets the Graham Criteria, although (imo) it's a really good sign of value if it does. For example, in Jan CJR.B and WJA both met the trailing P/E and Graham multiplier criteria. However more recently, I bought AAPL but the current P/E x P/B is much higher than 22.5.
Sr. Member
Jul 17, 2013
584 posts
95 upvotes
Greenwich, CT
pulkit10 wrote: I think it's important to consider the asset mix here too. When you're looking at a company that can ward off debt being called in, you're looking at two things: current assets and net cash flow. The former decides how much they can immediately raise and the latter decides how much cash they can get through operations in the short term. Or consider a company that is close to bankruptcy - how would you compute the liquidation value here?

Items like inventory, plant, property and equipment are highly subjective in value because they have niche uses. Consider an upgrader unit that CNQ just spent $250 million on. If it were to go into bankruptcy proceedings tomorrow, how much do you think it'll fetch? I think maybe a tenth of the value. The same is true of property designed by a company just for its specific use. All these items are carried on their stated value in the balance sheet but what are they really worth? For this reason, I choose to focus on current assets (cash, receivables and short term investments) when evaluating a balance sheet. I think this is a far better indicator of balance sheet strength than any other ratio.

That said, your point regarding the debt/cash flow ratio is equally valid (and CNQ is certainly worse off there). However, this ratio has its own limitations and those should be kept in mind. Cash flow can be fickle when the company is a) spending heavily or b) liquidating heavily.

But that's why ultimately it's the price of the company that really matters. If CNQ has $31 billion in debt and can be reasonably expected to earn $4 billion in cash, what price would you pay? If the current quotation is much lower than this value, buying it makes sense. The same logic should be applied to TOU. You already know that it is a strong company with a great balance sheet, but what price would you pay for it, having read only the balance sheet/income statements?

I'm not too concerned with the Horizon projects. They might have a hiccup or two there but they'll manage given that they still have lots of financial muscle (still no layoffs or cuts) compared to other producers of their size. I'm more concerned with the Kirby projects and how they'll materialize because that'll decide how the company is doing 5-6 years down the road.
I think you're a little off base here. When I say debt to cash flow (or anyone in the oil & gas space), the "debt" used is "net debt", which factors in cash & net working capital (current assets - current liabilities). Looking at current assets separately would be redundant.

Also, midstream asset hold their value quite well and are often sold for a gain even in this economic environment because revenue stream is essentially guaranteed (even if the operator goes bankrupt and changes to another operator) and it's easier to buy these asset than to build (regulatory approvals, time, no guaranteed revenue stream, etc). IF CNQ went bankrupt, the upgrader would go for close to full value, because the buyer knows that someone will pick up the resource asset and produce enough volumes to essentially guarantee the revenue for the upgrader. Take a look at any facility sold near a quality asset and you'll see that they sold it near cost or at a gain (e.g. Whitecap, Paramount, etc).

Regardless, good discussion.

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