When Donald Trump won the US election in November, the nuclear energy sector in the US let out a collective cheer. While his policy towards nuclear power in the US played a far subtler part of his campaign than did coal mining and fossil fuel energy, that Trump would be good for nuclear power, particularly in terms of domestic industry activity, was taken as given.

The importance of political tailwind in the nuclear space right now can’t be understated. The nuclear sector relies on a constant supply of uranium. Without uranium, the reactors can’t operate. Over the last ten years, the industry has basically ground to a halt, with the financial crisis and the Fukushima incident in Japan combining to drive uranium prices down to twelve year lows. The February spot for uranium came in at $23 per lb. As of March 24, this had risen slightly to $24. This compares to $136 back in mid 2007.

For producers, this has been, and remains, a big problem. The average producer can’t turn a profit on anything less than $40 per lb. At current prices, even the most efficient producer isn’t making money on the uranium it’s extracting.

When you can’t extract profitably, you stop extracting until things turn around. This is what’s happened. Kazakhstan, the worlds largest uranium producing nation, announced in January that it would cut 2017 production by 10% on the year-ago levels.

At the same time, the industry is ramping up towards a dramatic increase in demand. China has twenty reactors under construction right now. The US has four under construction. Between Japan, Russia and India, another fourteen are being built. Between now and 2035, another 155 reactors will be added to the just shy of 450 already active.

You don’t need to be Adam Smith to recognize that price isn’t going to stay low for long.

Some will point to (and indeed are pointing to) the uranium surplus that exists right now as indicative of a delayed rebalancing, but the truth is that this surplus exists purely because Japan has a large portion of its reactors laying idle post-Fukushima. Once these reactors become active, and they will do near term, the oversupply disappears overnight.

There’s opportunity, here, and it comes in the form of uranium producers. So many uranium stocks are oversold based on the industry wide depression, and just as resource price has already bottomed out, so have these oversold entities.

The obvious exposures to the recovery are companies like Cameco Corp (USA) (NYSE:CCJ) and Rio Tinto plc (ADR) (NYSE:RIO).

There are some less obvious exposures available, however. Just as with other natural resource industries, the uranium space is full of under the radar plays that have the potential to move quicker, turn around harder and serve up superior returns than the incumbents.

We’ve been on the lookout for one such company, and we’ve found one – Uranium Energy Corp. (NYSEMKT:UEC).

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