Tuesday, 26 July 2016

Why i Buy UEC (Uranium Energy Corp)


All that glowing chatter on the streets (not Wall Street, mostly on the main streets of Canada and Australia) about U3O8 has radio activated my hormones. These chatter is actually rather quiet, which is what i like. I like to buy stuff when not many people are talking about. Why buy umbrellas when everyone is talking about rains?

Google search trend on "Uranium price"
Checking of uranium price is close to decade low

One chatter - well, loud spiel - came from Dr. Kent Moors, supposedly the world authority on energy (so he claims by citing his numerous appearances on the major news media like CNBC, Bloomberg, yada yada yada). He actually started his sales pitch on the uranium renaissance in 2014, saying that the uranium price spike is neigh. Part of that was the speculation of Japanese restart in nuclear energy solution.

What piqued my interest wasn't due to Dr. Kent. After all, he's just drumming up for newsletter subscription. I didn't subscribe to his newsletter, but i worked out one stock in his teaser article, and it's UEC (Uranium Energy Corp). What made my ears perked up was the fact that Li Ka-Shing (aka Uberman), the richest man in HK, put his money in UEC in 2014. I couldn't remember if Dr. Moors mentioned Li, but i know for a fact that Li bought UEC.


Uranium U3O8 historical price chart from 1988 to 2016.
U3O8 chart from 1988 to 2016. A blip is registered in 2014.
(Click to enlarge)

As it turned out, the year 2014 was a year of dead-cat bounce for uranium spot price, which resumed its downward trend afterward. I didn't follow Li immediately. As usual, billionaire like Li isn't a trader, but investor, and so his timing is usually lousy. Like George Soros' initial entry into ABX in 2014. Soros' gold call was correct, just 2 years too early. Similarly, i think Li was 2 years too early. Maybe more.

So why Sir Li bought uranium shares? Here's what i think. There's no secret that Chinese government wants to clean up the pollution, and nuclear energy is the only practical solution (even Greenpeace is on-board with the nuclear option as a viable solution to climate change problem). Unlike the West, there's no luxury in debating the nuclear issue in China.

Sir Li, being the richest man in HK, does a lot wheeling and dealing in China as one can imagine, he must have heard about that. While building more nuclear reactors is an official policy, still it's better to hear it straight from the official horses' mouths. It's more reliable than official media. Not that one should disbelieve how serious Chinese government wants to clean up their air because this is one issue that would undermine the legitimacy of the Chinese communist party.

At this point i decided to get into UEC (@ 90 cents). Can it go further down from here? Sure. Maybe uranium spot price will never recover. Sure, why not? Investment isn't about timing perfectly, which isn't possible. Anyone say otherwise is a liar. All i can do is gauging that the downside to upside is small enough for me to take a punt.

UEC (Uranium Energy Corp) price chart from 2007 to 2016.
UEC price chart from 2007 to 2016.
(Click to enlarge)

Technician would point out that i should wait for the price to break out the downtrend line in UEC before i buy. Well, i would rather be 1 year earlier than 3 months late to the uptick. I did that in ABX gold purchase (bought some in Dec 2014 not long after Soros' purchase, and some more in Oct 2015. Soros loaded up his golden truck in 2016) than buying it in July 2016.

Maybe it's my imagination, looking at the chart, this is the 1st time that UEC's price actually doing something that resembles a basing pattern in the last 13 months or so. The closest thing of one other basing pattern in this share occurred for a few months in 2009, and look at what happened after that.



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