The last few weeks have been crazy for the TSX. After climbing to all-time highs, up 70% since March 2020, shares collapsed in October. As of writing, the TSX is down about 3% since the beginning of September. Yet it wasn’t that long ago that uranium stocks were taking up headlines.
So, what’s going on with uranium stocks this week, and what should investors consider when seeing them on the TSX today?
Why uranium stocks?
For those that were out to lunch before the downturn, uranium stocks saw a massive amount of investment in short period of time. In fact, uranium stocks like Cameco (TSX:CCO)(NYSE:CCJ) have been soaring ever since U.S. president Joe Biden came into office in January.
Biden announced the U.S. not only would be investing in new renewable energy but using existing renewable energy assets as well. That includes nuclear power, and thus uranium stocks started climbing.
However, there continue to be many uranium stocks that trade at incredibly cheap prices. That included Cameco stock until recently. Thus, these uranium stocks became a prime target for retail and meme traders.
Now a risk
Since January of this year, shares of Cameco stock for example are up 60%. However, in the past months, shares have started to come down. Since Sept. 13, shares in Cameco stock fell 13%, and shares could continue to drop, as retail traders dump the stock after pumping it for months.
Some Motley Fool investors may wonder if now is a good time to get back in on uranium stocks once retail traders get out. However, I wouldn’t be too sure. Certainly, it doesn’t have anything to do with the quality of the company. That’s the problem! These uranium stocks are primed to be bought in bulk yet again, only to be dumped once more. And that Sept. 13 number can’t be a coincidence, considering the stock entered overbought territory that day.
Should you sell Cameco stock?
In short, no. While I might hold off on Cameco stock for now, I wouldn’t forever. In fact, according to analysts, Cameco stock provides a far less risky entrance into the uranium markets. Other uranium stocks that are in the single-digit share range pose a significantly higher risk for Motley Fool investors on the TSX today.
In Cameco’s case, it has a diverse set of uranium sources, supported by long-term contracts with a lot of downside protection — protection it’s needed this last decade. Furthermore, as uranium prices increase, it has several operations that can quickly come online to create a larger production line.
As of now, shares of the stock have a potential upside of 15% for the next year. Sure, that’s not as exciting as the 112% Cameco stock saw in the last year. However, it’s manageable. All Motley Fool investors can hope is that this stock remains on solid ground. There is a lot of future potential for this stock that I would consider if you’re looking for a long-term investment. As for other uranium stocks out there, I simply cannot say the same.