In today’s Exponential Investor:
- Hard task of changing the detractors’ opinions
- Hard concepts of price and value
- Hard numbers of nuclear power
OK! Our heading is a little facetious, but please bear with me.
Much of our work here at Southbank Investment Research is based on the idea that conventional wisdom is often wrong.
Luckily for us, conventional wisdom really is often wrong. That means that there are many investment opportunities for us to write about.
This edition of Exponential Investor draws on a recent edition of Frontier Tech Investor that I penned.
Out of fairness to the paying subcribers to the latter publication, I do not provide any specific stock recommendations here.
However, there are some interesting insights to be found if you bear in mind two things. First, lab-grown chicken and nuclear power have bad reputations and numerous detractors. Second, the reputations are inaccurate and the detractors are unfair.
I hope that you find the discussion entertaining and informative.
Coming out of (and, for that matter, providing) the limelight
The thing is, the nuclear energy sector continues to go from strength to strength. In fact, you could argue that it is coming out of the shadows and quickly into the limelight.
Nuclear energy has always had negative connotations: in some circles, “nuclear” is a dirty word. We’ve discussed this at length previously: nevertheless, nuclear energy is better than most industries in terms of its ability to have a positive (reducing) impact on people’s cost of living.
We recently had a debate here in the office about whether one of our team would eat chicken that wasn’t chicken, but was in fact lab-grown chicken. That means still chicken, made from chicken cells, just not grown the “traditional” way.
One colleague said that he wouldn’t eat it until he knew it was safe. We’d explained that the US Food and Drug Administration (FDA) had determined this lab-grown chicken was safe and that it had cleared it for sale and consumption. But that wasn’t enough… how do we trust that the FDA is right?
Arguably you could say nothing is safe, and we shouldn’t trust anyone. But at some point, we must eat to survive, right?
The price is the thing that really matters
Why am I talking about lab-grown chicken in the same breath as nuclear energy? Well, the two have a bit in common you see.
Suppose you find two packs of chicken on the shelf in the supermarket fridge. They are exactly the same, but one is lab-grown chicken meat and the other is meat from a real chicken somewhere. What is going to be the key factor that determines which of the two packs is the one that you choose to buy?
The answer is: price.
If traditional chicken is £4 per pack and the lab-grown chicken is £3 (25% cheaper) and you can’t tell which is which, they are exactly the same: that means that you’d choose the cheaper one.
The role of the chicken in this instance is not to be a chicken. Its purpose is to feed you and your family. Both do that job. So of course, it makes more sense to go with the cheaper one.
Well, the same concept applies to electric power.
Let’s be frank here, what if there was a way to have cheaper energy bills, less impact on the environment and less reliance on foreign nations for the supply and security of your energy.
If you are in the “energy aisle” and you are looking at two “packs of energy” on the shelf, what are you really thinking right now?
Are you wondering about the jobs they provide, the impact on the environment, where they come from, whether they’re solar, wind, geothermal, nuclear, coal, hydrogen…?
Alternatively, are you looking for the solution that will heat your house most cheaply – so that you have enough money in your purse with which to buy some chicken in the next aisle?
The point is that to the end user, the consumer, to you me and everyone else in this country, cost almost always trumps the greater good.
If you surveyed everyone who runs a household in the UK, I think that you’d find that the one thing that they all want to be lower in terms of cost is their energy bill.
Another bull market
The only way forward when it comes to energy security, energy accessibility, energy abundance and cheaper energy is to develop and deploy more nuclear energy. The good news is that this realisation is finally being seen across the globe by both governments and individuals.
This also means the uranium industry is in a pickle. But we’re talking about a pickle that brings investment opportunities.
You see, there’s currently not enough uranium to supply the world’s nuclear reactors. According to John Ciampaglia, CEO and senior managing director at Sprott Asset Management,
“The world’s 434 nuclear reactors need 180 million pounds of uranium every year for fuel and last year, all the mines globally only produced 130 million pounds,”
Furthermore, the International Energy Agency (IEA) think-tank expects nuclear energy generation to:
“… grow 53% from 2021 to 2050 based on current stated government policies in place, 84% based on announced government targets and 109% on its net zero emissions by 2050 scenario.”
While 2050 might seem a world away, the reality is that the change doesn’t all come in one big hit in that year. There will be a continuous move towards more nuclear energy generation, starting now. The potential doubling of generation over the next 20 years is a huge development.
All this leads to what we consider the perfect conditions for a nuclear and, subsequently, uranium-focused bull market: this is a bull market that should surpass the peaks set in 2007.
Editor, Exponential Investor