First Brexit… then Trump… Now, it’s time for Pro

Is your portfolio really prepared for what’s coming next?

To help investors like you navigate this historically uncertain — yet high-flying — market and prepare for an inevitable downturn, we’re re-opening our Motley Fool Pro Canada service to a select few new members for a short time.

To discover how Pro Canada could help you to increase your upside potential… reduce your downside risk… and earn paycheque-like income in the process, simply click here — before the small number of spots we have left are all gone!

With Shareholders Fed Up, Cameco Corporation Is Trading at a Discount

Cameco Corporation (TSX:CCO)(NYSE:CCJ) shareholders must be losing their patience by now. After the price of uranium crashed in 2011, uranium prices have seemed unsustainably low but have yet to recover. And on Monday CEO Tim Gitzel admitted that a recovery may still take some time.

To put this in perspective, Cameco’s stock actually trades for less than it did in the depths of the recession. So with investors so fed up, is now actually a time to step in?

Why uranium prices remain depressed

The bull case for uranium prices is fairly straightforward. At a spot price of US$35 per pound, it is uneconomic to develop any new mines. Meanwhile, China has 24 nuclear power reactors under construction and has plans to build seven more each year to 2030, and Japan is slowly restarting its nuclear power sector. Longer term, nuclear power should play a key role in the fight against global warming.

Put it all together, and uranium could be in short supply, at least until the market rebalances. Given the cost of building new mines, that could easily mean a doubling of uranium prices.

Unfortunately for Cameco, supply has held up relatively well. Mines are costly to shut down, and no one wants to reduce production just to see competitors benefit. Secondary supply from uranium enrichment plants is also strong. Furthermore, there has been a massive inventory overhang. And more recently, weak currencies have lowered supply costs in countries such as Kazakhstan, Australia, and Canada.

On the demand side, the Japanese recovery has progressed at a much slower pace than previously anticipated. And in the United States we’ve even seen some reactors taken offline, thanks mainly to competition from cheap natural gas.

Why now may be the time to buy Cameco

Cameco is fully aware of these issues. The company even took a $210 million impairment charge on its Rabbit Lake operation.

But over the long term, the supply/demand fundamentals are very strong for uranium, and this isn’t yet reflected in Cameco’s share price.

To illustrate, the company trades at roughly 17 times adjusted earnings, even with uranium prices this depressed. So if you’re willing to be patient, all you have to do is hold Cameco stock until the uranium market comes back into balance. That’s not a bad bet to make.

Another great stock besides Cameco

Exports of liquefied natural gas could be one of the best growth opportunities out there for long-term investors. And, we think we've identified the Canadian company to invest in. It's a global company with operations across nearly 20 countries and 70 locations. We like it so much, we've named it as 1 Top Stock for 2016 and Beyond. To find out why, click here now to learn how to access your FREE copy today!

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

NEW! This Stock Could Be Like Buying Amazon In 1997

For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Stock Advisor Canada’s Chief Investment Adviser, Iain Butler, also recommended this company back in March – and it’s already up a whopping 57%!

Enter your email address below to claim your copy of this brand new report, “Breakthrough IPO Receives Rare Endorsement.”

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.