Investment opportunities for nuclear energy

October 19, 2023, 9:30AMANS Nuclear Cafe


Nuclear energy stocks “have become far more compelling to many investors in recent years,” and “there are good reasons to support this carbon-free source of energy,” according to investment entrepreneur and financial lecturer Jason Hall. In an article recently published by The Motley Fool, Hall discusses the opportunities and risks of investing in nuclear energy companies and offers his perspective on three top nuclear energy stocks.

Nuclear basics and new innovations: Hall started at the beginning, describing the most basic aspects of nuclear energy: the production of heat through fission, the generation of electricity via turbines, and the mining and enrichment of uranium for fuel. He noted that there “are only a small handful of companies with the expertise and financial strength to deal with nuclear reactors, and almost all are either private, state-owned, or the subsidiary operation of a large industrial conglomerate.”

One key point he made is that new technological innovations with “nascent small-scale nuclear reactors” are making investment opportunities more attractive. While he said the energy-generating potential of nuclear fusion is “significantly safer and cleaner than any other source of energy under humanity’s control today,” Hall recognized that it may not be commercially viable for many decades.

Three highlighted stocks: With that nuclear primer out of the way, Hall examined the stock market investment potential of three companies in the nuclear energy industry—Cameco, General Electric, and Brookfield Renewable.

Canada-based Cameco produces the world’s highest-grade uranium, including uranium hexafluoride and uranium dioxide. Because of the cyclical pricing of natural resources, Hall said, companies based on these resources tend to go through boom-and bust periods. Despite commodity swings, Cameco has been successful in generating “positive operating cash every rolling four-quarter period with only one exception” during the past 13 years. He added that this company’s stock “isn’t cheap.”

General Electric, Hall acknowledged, “has generally not been good to shareholders for the previous two decades.” However, he explained, the giant corporation is currently spinning off several business units that should become more appealing to investors as stand-alone companies—like GE Vernova, a spinoff that includes GE Hitachi Nuclear Energy. . According to Hall, this new energy-focused company should be attractive to investors because it will not have GE’s previous problems “caused by its sprawling structure, leading to conflicts between business units and management’s poor allocation of capital across the enterprise.”

Brookfield Renewable, a hydroelectric, wind, solar, and energy-storage company that is in the process of acquiring a controlling stake in Westinghouse Electric, is one of the largest nuclear services companies, Hall said. According to a strategic partnership formed in October 2022, Brookfield Renewable and its institutional partners are to own 51 percent interest in Westinghouse, with Cameco owning 49 percent. This acquisition represents Brookfield Renewable’s entry into the nuclear sector, and, as Hall pointed out, the company “has a long, solid legacy of moving into nascent and formerly out-of-favor technologies when there’s a clear path to profits.”

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