Shares in companies exposed to uranium are rallying based on intense speculative interest from social media site Reddit.
The Sprott Physical Uranium Trust , an exchange-traded investment that tracks physical uranium, was up 12 per cent in early trading on Monday on the Toronto Stock Exchange. Cameco Corp. shares, which have rallied 55 per cent since late August, were up 3 per cent.
This year, retail traders on sites like Wallstreetbets have muscled traditional market-moving institutional investors out of the way, and single-handedly driven up the share prices of companies such as Gamestop Corp. and Blackberry Ltd. to levels far above what was considered fair value. On a number of occasions after huge spikes, companies such as Gamestop have fallen back to earth quickly after the Reddit investors moved on to other stocks.
Investors on social media sites have also targeted the mining sector this year with silver getting a huge boost a few months ago due to a similar Reddit-inspired rally. Lately, Wallstreetbets has zeroed in on uranium, with speculators pushing the narrative that the nuclear fuel will benefit from the move to greener sources of energy. While the mining of uranium and construction of power plants generate large amounts of carbon dioxide, nuclear power itself produces no emissions.
Bill Harris, a portfolio manager with Toronto-based Avenue Investment Management, which owns shares in Cameco, is watching the current rally with a mix of bemusement and wonder. While delighted that his investment is working out, the rapid jump in the commodity has him setting short-term limits that allow the firm to partly cash out its position, while still maintaining a stake in the market to take advantage of possible additional upside. “It’s crazy,” he said of the current Reddit-fueled rally that he says has little do with fundamentals.
Like the silver market, uranium appears tailor-made for big bumps when speculators take hold. After cutbacks in production among miners like Cameco, the supply of physical uranium is tight meaning even short term bumps in demand can result in big price movements. Demand in the uranium industry has also increased this year due to the entry of players like Sprott into the market. Earlier this year, Sprott Asset Management LP paid $14.5-million to reorganize Uranium Participation Corp. The reorganized entity, called the Sprott Physical Uranium Trust, is one of the few companies in the world that stockpiles physical uranium.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.