12 Dec 2009 by Jim Fickett (statement on the authority of the WNA corrected 21 Mar 2010)
This week I increased uranium from about 2% of my portfolio to about 3%. This is not meant to be a speculative bet aiming for a high payout, but rather a store-of-value investment that helps protect against eventual inflation.
As detailed in the Commentary section earlier, I expect inflation to become a problem in a few years. As a defensive move, I plan to increase my holdings of commodities. This will be done gradually, buying into individual commodities at various times when I feel each is at or below long-term fair value.
My personal style is to have a fairly large portion of the portfolio be rather boring, aimed mostly at maintaining value, and then to have a smaller portion with some more speculative investments. Uranium goes in the boring part. I think that (1) uranium is either fairly priced or perhaps cheap, and (2) there will be enough volatility that I can get out later at a decent profit – enough to cover tax and inflation.
At some point I'll put up some reference pages on uranium. For now, the concise summary is as follows:
Demand will increase consistently.
Supply will be adequate but bumpy.
As an aside, the vision of essentially infinite supply via breeder reactors is still not economically viable (subscription required for this article).
The price is probably a little low right now.
Although my best guess is that the price is somewhat low right now, I do not place a great deal of faith in that estimate. Rather my reasons for getting in now are (1) the price is certainly not out-of-line high, and (2) both public policy around uranium (e.g. decisions about recycling weapons) and large-scale mining of uranium are quite unpredictable. There will be major ups and downs, and it is a pretty safe bet that sometime in the next 10 years the price will be significantly higher than it is now.
My holdings, by the way, are in the Canadian company Uranium Participation Corporation (U.TO or URPTF.PK). This is essentially a big warehouse full of uranium oxide, managed by Denison Mines, one of the large mining companies.