The growing push in the United States for an energy policy that lowers the country's dependence on oil always seems to bring nuclear energy into the discussion.

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A Change In Energy
In a speech this May, Sen. Lamar Alexander proposed that the U.S. build 100 new nuclear power plants over the next 20 years, nearly doubling the current output. The U.S. currently has 104 reactors that provide the country with 20% of their electricity. The Senator's proposal is aggressive, but it illustrates the scope of change many in the U.S. are pushing for.

France already produces 80% of its energy from nuclear energy and Japan is currently building one plant a year. The long-term path seems quite narrow if the U.S. is to significantly reduce its carbon emissions - the only economical option seems to be the yellow cake.

Canadian Uranium
If you're looking at adding uranium to your portfolio, you should probably take a look at some Canadian-based companies. The juggernaut in the uranium mining industry is Cameco Corporation (NYSE:CCJ). It has approximately 15% of the world's uranium production. If the U.S. looks for a uranium supplier in the future to secure its supply, Cameco would probably be a top contender.

However, Cameco Corp's valuations are at the high end of the industry range both in terms of P/E and price per pound of U308. The price/U308 lbs ratio gives a clearer picture of relative valuation than P/E, and is usually a good starting point for further analysis.

Some names that trade at lower Price/U308 ratios are Canadian-based Uranium One (TSE:UUU.TO), Denison Mines Corp (TSE:DML.TO), and Paladin Energy (TSE:PDN.TO).

The trade-off of investing in these names is more risk, operationally and politically. For instance, Uranium One was recently linked with a scandal in Kazakhstan that brought into question their ownership of key uranium properties. It was alleged that some officials of Kazatoprom (the state-owned uranium company) illegally sold uranium properties to foreign companies at clearance prices. This news caused the stock to tumble over 50% but it has slowly recovered in recent weeks as news surfaced that Uranium One's properties would probably not be affected.

In addition, Uranium One got a vote of confidence in early 2009 from a Japanese consortium made up of Tokyo Electric Power Company, Toshiba and Japan Bank for International Cooperation. This consortium agreed to purchase 117 million shares in Uranium One at $2.30 CAD per share - most likely to secure uranium supply for Japan's future reactors.

The Bottom Line
Smaller uranium companies can be more volatile in the short term, but if you're looking for a long-term play in uranium to take advantage of the shift in energy sentiment, these names are worth a look. (Read Buy When There's Blood In The Streets, to learn how contrarian investors find value in the worst market conditions.)