Portfolio Update: Building My Positions (UUUU; November 20, 2015)

As I mentioned in the last post, I’m easily finding lots of good bargains out in the marketplace right now. One stock in particular that I’ve been monitoring is Energy Fuels (UUUU). This uranium producer has been beaten up to a bloody pulp these past few weeks…

I can still recall when I first began researching this company back in late August. At the time, the market cap was about $200 million, and many analysts were claiming that the stock was cheap. Well, fast forward to today and the stock price has been slashed by over 50%; the market cap is now under $100 million.

From Yahoo Finance:

From Energy Fuels: (August 2015 Presentation):

$4.26/share just a little over 3 months ago…

To my knowledge, not much (negative) has changed with the company since August to cause such a precipitous decline in the share price…

In fact, market sentiment (for the most part) was positive after the company announced the following in early November:

From Energy Fuels:

Here’s the other bit of news:

From Energy Fuels:

I contacted the company directly via e-mail for a response, but to date have not yet heard back from them…

Update (11/23/15): Company responded to my inquiry on November 23, 2015:

• There is no discernible reason for the large decline in share price.

• The company issued a press release to confirm no material change.

• No large institutions are selling at this time.

• Large retail investors from NY are liquidating substantial positions.

• The Uranium Global X Funds ETF (URA) has been getting some redemptions and might possibly still be overweight in their UUUU allocation.

• Tax-loss selling has commenced and this is a likely contributing factor driving prices lower.

• The ENTIRE uranium sector is experiencing a decline to some degree at this time.

Lastly, the company re-affirmed their belief that results from their Q3 earnings report were positive. As far Energy Fuels is concerned, they are executing their plan accordingly and it’s business as usual, in spite of the massive share price decline.

But funny enough, Energy Fuels did issue a press release yesterday to address the sharp decline in the recent share price (it must be really bad for them to have to take the time to do that!):

From Seeking Alpha:

Please note: This is PURELY speculation, and I don’t have sources to confirm this guesswork… Some investors are speculating that this sell-off is attributed to tax-loss harvesting and liquidating from some large funds, such as the Global X Funds Uranium ETF (URA). Please see UPDATE (above).

If that is indeed true, the current “crisis” makes for a wonderful opportunity to add more shares…

With selloffs such as these, sometimes it can be a gamble if there is more going on behind the scenes than the public is currently aware of… Hopefully, that’s not the case with UUUU!

Insider Buying (a good thing!):

From Canadian Insider:

Lots of activity in the month of November as the share price of UUUU has fallen! It’s always reassuring to investors to see management taking action and buying back their own shares when prices are cheap.

In any event, I’m also going to “take a swing” and use the current selloff as an opportunity to dollar-cost-average (DCA) down. I added 1,500 shares at $2.05/share. I now own 3,500 shares at a cost basis of $2.522/share.

Looking For Deals

I think most investors would agree that there is a lot of opportunity in the energy sector right now… Whereas most investors are fixated in the oil patch (and companies that pay dividends), I’ve decided to go astray just a little bit, and focus more in the uranium space…

Why uranium? Quite simply, I think the sector is more hated…

Companies are selling their U3O8 for less than the cost of production, and that’s something that usually isn’t sustainable long-term… especially not for a commodity where the demand is going up, not down.

At this time, my primary focus is still on scoring deals in gold and silver stocks because I feel like that sector provides the most value and upside potential… In the short to intermediate term, I really don’t expect uranium stocks to bounce back anytime soon… there’s no catalyst for prices to go up, yet…

Nevertheless, I try not to shy away from opportunity when it presents itself either (provided the fundamental story isn’t broken)…

Check out this depressing UUUU chart pattern:

From Google Finance:

In any case, I’m trying my best to stick to the game plan, even if it might not appear that way to readers… I have quite an extensive list of stocks that are on my “Watchlist” and whenever one position crosses a certain threshold, it gets flagged… For UUUU, it was already a current holding of mine, and when my total returns for that holding flashed -20%, I was immediately notified (spreadsheet cell gets shaded BRIGHT yellow!).

It approached -30% this morning, when I finally decided to make a move…

I couldn’t resist… UUUU at a market cap of ~$90 million and enterprise value of ~$110 million is trading for less than some exploration and development companies out there (e.g. Fission Uranium; FCU.TO)! Energy Fuels is the second largest Uranium producer in the U.S. with 925,000 lbs. of sales per year and ~ 100 million lbs. of resources in the ground (Measured and Indicated)…

Frankly, there should be a whole lot LESS RISK going with a producer than an exploration company…

But like any of that even matters to the markets right now… sigh…

Oh, well. More opportunity for investors like me, I guess 🙂

Overall, I like uranium long-term, but don’t really have much more desire to add any more shares after today’s move… But should UUUU fall to $1.50/share or $1.00/share, I’ll probably look to add a third tranche and finish topping off my position… At those prices, UUUU will for sure be trading like that of a junior exploration company with no proven resources in the ground…

In this insane deflationary environment for commodities, I seriously wouldn’t put it passed Mr. Market to make that possible!

Until then, it’s back to buying more gold and silver!

Happy Speculating!

Photo Credit: Energy Fuels