Time to Get Defensive With This Top TSX Commodities Stock

Here’s why Cameco (TSX:CCO)(NYSE:CCJ) could be a top-notch commodities stock for long-term investors to consider right now.

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Uncertainty in the market is driving some real concern among investors. The threat of rising rates prompted by inflation numbers not seen in some time is startling to many. The good thing is that there are various defensive stocks to consider. Cameco (TSX:CCO)(NYSE:CCJ) is one such commodities stock that I think is worth looking at right now.

This uranium producer is a company that has been out of favour for some time. Commodity prices have lagged over the past decade, with this sector largely out of favour among investors. However, I’ve remained bullish on Cameco over the years, due to this company’s unique positioning in a unique market.

Let’s dive into why this commodities stock could be a great pick right now.

Mixed results, but overall positives to take away

It’s earnings season, and with that comes the ability to re-assess various stocks. For Cameco, this earnings season has been broadly taken as bullish, despite mixed results.

The company announced revenue that actually declined year over year. Adjusted profit also halved from $0.12 last year to $0.06 this past quarter. However, on these results, Cameco decided to make a bold move and increase its dividend. The company pushed its annual dividend to $0.12 per share from $0.08 per share previously. That’s a significant jump, even for a company trading around $28 per share at the time of writing.

Investors seemed to have priced some earnings weakness into Cameco stock prior to these earnings. Uranium prices have been volatile, and that volatility hasn’t been beneficial for Cameco of late. That said, for those bullish on renewable energy and growth of uranium usage, Cameco remains a defensive stock that’s now turning itself into a dividend company. With a small but growing yield of 0.5%, there’s now something there for income investors to consider.

Increase in enthusiasm from smart money investors

There are two ways many retail investors pick stocks. One method is to do one’s homework and spend hours diving into the fundamentals of various companies one is interested in. Personally, this is preferable and should be employed by all investors (with the time).

For those looking to follow in the footsteps of the “smart money” (i.e., institutional fund managers), looking at which companies have been bought heavily is another route to go. In this regard, Cameco has picked up traction as an institutional money manager favourite of late.

Cameco found itself in 35 hedge fund portfolios as of the end of Q3 2021. The previous all-time high for this stock was 30. Accordingly, big money is increasingly placing big bets on Cameco.

Now, money managers can get it wrong. However, on balance, there’s a reason why smart money is going after Cameco. This business’s defensive profile is something the markets want right now. Accordingly, Cameco appears to be one of the top commodities stocks investors of all stripes are choosing right now.

Bottom line

There’s a lot to consider when it comes to this top commodities stock. Of course, like all investments, Cameco carries risk.

However, over the long term, I view Cameco as a great defensive holding for those concerned about uncertainty picking up. It’s a tough market out there, and it might get tougher soon. Thus, following the smart money into this trade doesn’t seem like too dumb of an idea.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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