Well, I think the article from The Fool that siempre pointed out is representative of how not just uranium stocks, but much of the natural resources sector is perceived by the mainstream. There are a number of reasons for this. One big reason is that the sector is so tiny in comparison to the overall market, that Wall Street has no use for it. They can't justify allocating analysts to a sector with such a tiny market cap.
Coincident with this is the fact that this is largely a Canadian-based market (at least for North American investors, Aussies and UK markets are different, for example). So not only is the market cap of the sector tiny, but the vast majority of the stocks that are accessibly by North American investors trade on the Canadian exchanges. So, there is little motivation for the Wall Street pump machine to call attention to the sector. They would much prefer that you continue to buy what they are selling.
Another factor is the investors. If you are depending on CNBC for your information, then you are spending your time researching toy manufacturers right now. Also, many people I speak with, including some fairly experienced investors, are unwilling or incapable of making a distinction between a non-reporting Pink Sheet issue and a Canadian-exchange traded company that has an OTC symbol assigned to it for access by US investors. In their minds, there is no distinction - and no need to distinguish - between FQVLF and DGSHT. A five-character ticker symbol is as far as they get. The ticker has five characters, ergo, it must be toxic.
For traders/investors that are TA-oriented, the uranium price is a conundrum. They will wait for the pullback. It has to pullback. Nothing goes straight up. Just look at the chart. It will pull back, it has to. Everything does. Doesn't it? All they need is one look at the uranium price chart to tell them that:
a) they missed the bull market altogether, or
b) they will have an opportunity to enter on the inevitable pullback
I have heard the argument more than once that fundamentals are superfluous since all information is reflected in the chart, and all charts pull back. It follows that no further study is required. Why waste your time trying to understand what makes the uranium market different than the market for every other commodity (as far as I can tell)? Just wait for the pullback!
Anyway, I am not saying that the uranium price will never go down. But until we really know what the situation at Cigar Lake is, I think that waiting for a pullback in the U price is an exercise in futility. That said, the uranium STOCKS (the little ones, that is) have proven to be just as volatile as their PM brethren. They have been tracking with gold/silver juniors and not with the uranium price, imo. I think that is largely due to the fact that the people investing in these stocks are a (small) subset of the PM/natural resources investors. And their (our) sentiment is largely driven by what is happening in those markets.
That seems to be changing, though, as people become more knowledgable about this market. That said, I don't think U stocks will be immune if the bottom falls out of the TSX for whatever reason and regardless of what is happening with the U price. The exception will be the company that actually comes up with a significant discovery. An examination of the Aurelian chart demonstrates that while the PM sector and bullion prices underwent a significant correction/consolidation from May through August, Aurelian's discovery resulted in a meteoric rise, oblivious to the rest of the sector.
That's how I see it, anyway... |
