Uranium demand up and a hydrogen company down (for now)
24th November 2022 |
This week one of our newer recommendations, Clean Power Hydrogen (LSE:CPH2) took an almighty hit to the stock price.
In Tuesday’s trading the stock lost around 25% of its value. This was due to problems with the supply chain for their electrolysers units and even worse, an issue with the design and operation of a test unit.
This design and operation fault resulted in Octopus Hydrogen cancelling its order and deciding to go with another electrolyser solution.
Clean Power Hydrogen tried to put a positive spin on all this. Nevertheless, we can’t deny that this is a troubling development for the company.
In assessing whether we stay in the position or exit, we’ve been looking at the market potential, the uniqueness of the company’s technology and its ability to deliver to market.
At this stage, we believe that we’re still early in both the company and the longer trend towards the adoption of hydrogen technologies.
That being the case, we remain in the position. However, until the company can determine that they’ve fixed and solved their operational and technical problems and that their MFE 220 units will work as intended, we’re going to move the stock to a HOLD.
What does chicken have to do with nuclear energy?
Ok, our sub-heading is a little facetious, but please bear with me.
The thing is the nuclear energy sector continues to go from strength to strength. In fact, you could argue that it is coming out of the shadows and quickly into the limelight.
Nuclear energy has always had negative connotations: in some circles, “nuclear” is a dirty word. We’ve discussed this at length previously: nevertheless, nuclear energy is better than most industries in terms of its ability to have a positive (reducing) impact on people’s cost of living.
We recently had a debate here in the office about whether one of our team would eat chicken that wasn’t chicken, but was in fact lab-grown chicken. That means still chicken, made from chicken cells, just not grown the “traditional” way.
One colleague said that he wouldn’t eat it until he knew it was safe. We’d explained that the US FDA had determined this lab-grown chicken was safe and that they had cleared it for sale and consumption. But that wasn’t enough…how do we trust that the FDA is right?
Arguably you could say nothing is safe, and we shouldn’t trust anyone. But at some point, we must eat to survive, right?
Why am I talking about lab-grown chicken in the same breath as nuclear energy? Well the two have a bit in common you see.
Suppose you find two packs of chicken on the shelf in the supermarket fridge. They are exactly the same but one is lab-grown chicken meat and the other is meat from a real chicken somewhere. What is going to be the key factor that determines which of the two packs is the one that you choose to buy?
The answer is: price.
If traditional chicken is £4 per pack and the lab-grown chicken is £3 (25% cheaper) and you can’t tell which is which, they are exactly the same: that means that you’d choose the cheaper one.
The role of the chicken in this instance is not to be a chicken. Its purpose is to feed you and your family. Both do that job. So of course, it makes more sense to go with the cheaper one.
Well, the same concept applies to electric power.
Let’s be frank here, what if there was a way to have cheaper energy bills, less impact on the environment and less reliance on foreign nations for the supply and security of your energy.
If you are in the “energy aisle” and you are looking at two “packs of energy” on the shelf, what are you really thinking right now?
Are you wondering about the jobs they provide, the impact on the environment, where they come from, whether they’re solar, wind, geothermal, nuclear, coal, hydrogen…? Alternatively, are you looking for the solution that will heat your house most cheaply – so that you have enough money in your purse with which to buy some chicken in the next aisle?
The point is that to the end user, the consumer, to you me and everyone else in this country, cost almost always trumps the greater good.
If you surveyed everyone who runs a household in the UK, I think that you’d find that the one thing that they all want to be lower in terms of cost is their energy bill.
The only way forward when it comes to energy security, energy accessibility, energy abundance and cheaper energy is to develop and deploy more nuclear energy. The good news is this realisation is finally being seen across the globe by both governments and individuals.
This also means the uranium industry is in a pickle. But we’re talking about a pickle that brings investment opportunities.
You see, there’s currently not enough uranium to supply the world’s nuclear reactors. According to John Ciampaglia, CEO and Senior Managing Director at Sprott Asset Management,
“The world’s 434 nuclear reactors need 180 million pounds of uranium every year for fuel and last year, all the mines globally only produced 130 million pounds,”
Furthermore, the International Energy Agency (IEA) think-tank expects nuclear energy generation to:
“…grow 53% from 2021 to 2050 based on current stated government policies in place, 84% based on announced government targets and 109% on its net zero emissions by 2050 scenario.”
While 2050 might seem a world away, the reality is that the change doesn’t all come in one big hit in that year. There will be a continuous move towards more nuclear energy generation, starting now. The potential doubling of generation over the next 20 years is a huge development.
All this leads to what we consider the perfect conditions for a nuclear and subsequently, uranium focused bull market: this is a bull market that should surpass the peaks set in 2007.
It’s an exciting time to have exposure to uranium and nuclear energy. In the Frontier Tech Investor portfolio, we hold Yellow Cake (LSE:YCA), Aura Energy (LSE:AURA) and the HANetf Sprott Global Uranium Miners ETF (LSE:URNM). this coming bull market.
All three remain open BUYS in our buy list.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our Buy List.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. These include power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms that are powering some of the key technologies of the modern day. These technologies comprise electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, particularly as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
HydrogenOne Capital Growth (LSE: HGEN): HydrogenOne is an investment fund listed on the LSE. It provides broad, diversified exposure to several private and publicly-listed hydrogen companies, encapsulating the entire hydrogen trend. One of its main constituents is Elcogen, a market leader in the provision of hydrogen fuel cells and stacks. With the UK government injecting £240 million into the hydrogen sector as part of its hydrogen strategy, now could be an opportune moment to take a position in the stock. You can find the original recommendation here.
The HANetf Sprott Global Uranium Miners UCITS ETF (LSE: URNM): URNM is an exchange-traded fund which provides diversified exposure to the nuclear energy industry by investing in uranium producers. Uranium is an essential ingredient in the generation of nuclear energy. The index it tracks invests in giants of the nuclear energy world, including Cameco and Kazatomprom. With tailwinds behind nuclear power remaining strong in the face of rising energy prices, geopolitical conflict – and the wider green energy transition – we believe that URNM has a strong investment case. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
