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A Glowing Portfolio
With the world's energy consumption set to grow by almost 50% by 2030 and doubling by 2050, nations around the globe are looking into alternative sources of power. While wind and solar will undoubtedly gain more and more of the energy pie, their technologies are in their infancies. Until they improve in cost and watt output, bolder and more established solutions are needed. Nuclear energy could provide the bridge needed to fill in the gaps as we wait for more renewable sources to take off.
IN PICTURES: 7 Forehead-Slapping Stock Blunders
Not Homer Simpson's Reactor Anymore
Currently, nuclear-based energy is the only form of green power that can produce capacity on a massive scale. One ton of uranium can produce more than 40 million kilowatt hours of electricity, the equivalent to burning 16,000 tons of coal or 80,000 barrels of oil. As concerns over air quality and global warming increase, atomic power is gaining prevalence.
According to the World Nuclear Association, several European nations have already embraced the source as the major contributor to power generation. Currently, France generates 75% of its electric power from nuclear, while Sweden gets 40% and Belgium gets 54%.
The United States currently generates about 20% of electricity from nuclear; it is the second largest source behind coal. (Don't want to be a passive investor? Discover how investment clubs allow you to take control of your portfolio Lights Out On Solar, Go Nuclear.)
But the biggest growth to the industry is coming from the emerging markets. China has plans to produce a five-fold increase in its capacity by 2020 and add a further three to four times increase by 2030, increasing its 11 operational reactors to 71. Russia is currently constructing 31 new plants and India expects to produce 20,000 mega-watts of capacity by 2020, using its 17 operable and 25 planned reactors.
Ways to Play the Resurgence
As one of the largest and most experienced builders and designers of nuclear reactors and facilities, Fluor Corporation's (NYSE:FLR) activity in the area is certainly increasing. With more than 9,000 nuclear professionals and nine new nuclear construction projects recently completed, Fluor stands ready to gain the lion's share of global projects underway.
Recently, the company was hired by Toshiba (OTCBB:TOSBF) to provide engineering and construction services to build two nuclear reactors for NRG Energy, Inc. (NYSE:NRG). Fluor also stands to benefit from the various economic stimulus packages in the works. Add this to the $11 per share in cash on its balance sheet, a P/E of 10 and a 30% return on equity and you have a value investor's dream.
Major Player
With control of 15% of the world's uranium market, miner Cameco (NYSE:CCJ) will be a winner. The company operates four major mines in North America and is developing two more mines, one in Canada and the other in Kazakhstan. Last year, the United States consumed around 55 million pounds of uranium oxide, but produced only 4 million pounds.
However, a tentative deal between the United States and Russia about reducing their nuclear weapons holdings is keeping uranium prices depressed. Nuclear weapons can be "recycled" into fuel rods for reactors. This deal could put nearly 500,000 tons of uranium back on the market. If the deal goes through, Cameco shares should fall as its share price, like most miners, is tied to the commodity they produce. (Learn more in Who sets the price of commodities?)
World Power
Exelon Corp. (NYSE:EXC) operates the largest nuclear fleet in the nation and the third largest fleet in the world. The company's ten power plants, with 17 reactors, represent approximately 20% of the U.S. nuclear industry's power capacity. Adding in Exelon's fossil fuel and hydroelectric assets, the company has a generation capacity of 24,809 megawatts serving nearly 5.5 million customers. The shares trade at a P/E of 11 and pay a market beating 4.3% dividend yield.
The Bottom Line
With world energy demand skyrocketing, new solutions will need to be put in place. Nuclear energy offers a relatively cheap and clean power source and can be used as a bridge until other renewable forms, such as solar and wind, become cost effective. The above stocks are a good way to play that industry demand.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 7 Forehead-Slapping Stock Blunders
Not Homer Simpson's Reactor Anymore
Currently, nuclear-based energy is the only form of green power that can produce capacity on a massive scale. One ton of uranium can produce more than 40 million kilowatt hours of electricity, the equivalent to burning 16,000 tons of coal or 80,000 barrels of oil. As concerns over air quality and global warming increase, atomic power is gaining prevalence.
According to the World Nuclear Association, several European nations have already embraced the source as the major contributor to power generation. Currently, France generates 75% of its electric power from nuclear, while Sweden gets 40% and Belgium gets 54%.
The United States currently generates about 20% of electricity from nuclear; it is the second largest source behind coal. (Don't want to be a passive investor? Discover how investment clubs allow you to take control of your portfolio Lights Out On Solar, Go Nuclear.)
Ways to Play the Resurgence
As one of the largest and most experienced builders and designers of nuclear reactors and facilities, Fluor Corporation's (NYSE:FLR) activity in the area is certainly increasing. With more than 9,000 nuclear professionals and nine new nuclear construction projects recently completed, Fluor stands ready to gain the lion's share of global projects underway.
Recently, the company was hired by Toshiba (OTCBB:TOSBF) to provide engineering and construction services to build two nuclear reactors for NRG Energy, Inc. (NYSE:NRG). Fluor also stands to benefit from the various economic stimulus packages in the works. Add this to the $11 per share in cash on its balance sheet, a P/E of 10 and a 30% return on equity and you have a value investor's dream.
Major Player
With control of 15% of the world's uranium market, miner Cameco (NYSE:CCJ) will be a winner. The company operates four major mines in North America and is developing two more mines, one in Canada and the other in Kazakhstan. Last year, the United States consumed around 55 million pounds of uranium oxide, but produced only 4 million pounds.
However, a tentative deal between the United States and Russia about reducing their nuclear weapons holdings is keeping uranium prices depressed. Nuclear weapons can be "recycled" into fuel rods for reactors. This deal could put nearly 500,000 tons of uranium back on the market. If the deal goes through, Cameco shares should fall as its share price, like most miners, is tied to the commodity they produce. (Learn more in Who sets the price of commodities?)
World Power
Exelon Corp. (NYSE:EXC) operates the largest nuclear fleet in the nation and the third largest fleet in the world. The company's ten power plants, with 17 reactors, represent approximately 20% of the U.S. nuclear industry's power capacity. Adding in Exelon's fossil fuel and hydroelectric assets, the company has a generation capacity of 24,809 megawatts serving nearly 5.5 million customers. The shares trade at a P/E of 11 and pay a market beating 4.3% dividend yield.
The Bottom Line
With world energy demand skyrocketing, new solutions will need to be put in place. Nuclear energy offers a relatively cheap and clean power source and can be used as a bridge until other renewable forms, such as solar and wind, become cost effective. The above stocks are a good way to play that industry demand.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Aaron Levitt
Aaron Levitt is a SABEW investment journalist and analyst living in State College, Pennsylvania. His work appears in several high profile publications in both print and on the web. Aaron is a graduate of The Pennsylvania State University where he studied Economics and International Business and he is an advocate for long-term investing with a global framework. You can follow his picks and pans at @AaronLevitt
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