Sunday, May 28, 2006

Uranium Stocks Post Correction

An inevitable broad-based correction hit the TSE and Venture exchanges and uranium stocks were not spared. As I have cautioned before, there were many uranium juniors whose market caps were out of proportion to their actual value. These were the companies who were hit worst of all and who have been slow to rebound.

Out of panic selling, however, comes opportunity and many bargains could have been found during the nadir of correction. For example, Duane Parnham, CEO of Forsys Metals Corp. (CVE:FSY) added 40,700 shares from May 12-19, increasing his personal stake during a time where FSY plunged from $1.93 to $1.59 (it is back up to $1.80).

Of course, the fundamentals of uranium supply and demand has not changed a single iota during this time. Weekly uranium oxide spot price from uxc.com is still at US $43.00/lb. Speculative buying and selling were largely to blame for the the massive upward trend of uranium juniors, and the painful correction thereafter.

This is why picking the right uranium stock is essential. While it was disheartening to see Urasia Energy (CVE:UUU) plunge from all the way down to $2.67 from the $3.40 mark, the fact that I have full confidence in its management and its status as one of the emerging uranium producers in a market with unchanged fundamentals gives confidence to average down my buying price. The stock right now is at $2.95.

Great companies will always live through corrections. Urasia, Paladin Resources (TSE:PDN), Forsys, Ur-Energy (TSE:URE), sxr Uranium One (TSE:SXR), and Uranium Participation Corporation (TSE:U) can give you that measure of comfort even in these volatile times.
 

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