Uranium: To Catch a Falling Knife!
Thursday, August 16, 2007 at 7:42AM
Uranium Stocks in Uranium
The much watched spot price for uranium is now $105/lb, having dropped from $138/lb for a loss of 31% in a matter of weeks. The un-correctable is now experiencing a correction.

Uranium Chart 16 August 2007

The news flow is virtually non-existent in terms of uranium traded so all eyes are focused on the one and only auction planned for the 17th August. This event is actually not that important when considering the bigger picture, however, with the markets in general going through an upheaval, the search for some reassurance intensifies. The result may come as a relief to some investors or if the price is significantly lower, an added pressure. As you know we own the metal through a fund so it does have a direct effect on our portfolio. Our strategy remains unchanged and will continue to hold and sit this one out. The supply/demand fundamentals if anything are improving on a daily basis with the like of South Africa turning towards the nuclear industry in order to supplement its future energy needs.

The ramifications for uranium stocks are tied to the above whether we like or not, so we must expect erratic swings either way based on auction results, rumours, extrapolations by whoever is available for comment and the theme from last nights business programme. These are now choppy waters so expect the un-expected, hold on tight and get through it.

Our strategy is to hold on to the uranium stocks that we have accumulated despite the inclement weather so as a small group of investors our efforts must be concentrated on how we can make the best of this buying opportunity. Most of our cash is already in the market, however, as a group we remain confident that this course of action is the right one to take to the point that our group is generating more cash to be invested in the precious metals sector, which we consider to be uranium, gold and silver.

A few days ago we mentioned capitulation as the uranium stocks were taking a hammering and some investors headed for the exit. Since that article the uranium sector has been battered further with a number of large drops occurring yesterday. To us it does appear to be a case of the baby being thrown out with the bath water, but out they go as investors scramble to stop the pain and also to raise the cash to finance other calls on their portfolio. We are fortunate enough not to have other calls on our capital so hopefully we will not be distracted from the task of bottom fishing.

Members of our team ask why we are not jumping on these opportunities today; well it’s a little like trying to catch a falling knife. Let it fall, hit the deck and then pick it up. True we may miss some of the rebound but we would feel more comfortable with a recognisable reverse in this down trend before moving.

But move we will.
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