The spot price for the underlying commodity has gone up 25% since I invested in CCJ, yet the share price is down over a dollar since then (I first bought after the Jan pullback to $35). For those who bought in at the top, the picture is even more upside down.
One could argue that, given the high PE these spot price increases were already priced in and we are now simply getting back to a less inflated valuation of CCJ shares. However, nothing I've read would indicate to me that there is excessive speculation going in here. There is a production/supply imbalance that is driving the fundamentals, and layered on top of that we have increased demand from new nuclear power projects coming on line in asia over the next years.
Personally I believe the CCJ is being incorrectly sold off in the recent commodities panic and that this is a market inefficiency that needs to be taken advantage of by investors.
I may be wrong but CCJ seems to respond more to the movement in gold rather than the constant move up in U. I think the stock got a bit ahead of itself but looks very reasonable at the current level.
"Personally I believe CCJ is being incorrectly sold off in the recent commodities panic and that this is a market inefficiency that needs to be taken advantage of by investors."
That's a well written summary of the current situation.
Do you think this commodity correction is over?
"Do you think this commodity correction is over? "
I don't have a crystal ball but I'll answer it this way: I'm a buyer of commodities here, although not so much oil (too much geopolitical crap going on there for my comfort level). Besides, CCJ trades with, but outperforms, oil anyway:
So I'm a buyer of CCJ under $35. I guess that means I think the worst of this correction is over. I wouldn't be surprisied if we stay flat or even go 5-10% lower from here short-term (spring) but I think the mid-term trend (2006) is up from here.
I think the long term picture is clear. The world needs more energy each year but is producing less. I don't think anybody would argue that point. So there is money to be made from that fundamental problem. Nuclear will get some of the money. The oil/NG industries will get some of the money. Alternative energy will get some of the money. Short of WWIII and/or global recession, the money will flow. I buy drillers to cover the oil/NG thesis. CCJ (and maybe USU later this year) to cover nukes. I don't have an alternative energy play because they are too speculative for my comfort at this point.
But I'm no expert. I just read as much as I can and try to buy low/sell high.
>Do you think this commodity correction is over<My own take is-as of late uranium stocks as a whole have followed Oil & gold somewhat on the negative side.Both oil& gold are at critical supports for there respective sectors.Oil just broke below $60 a barrel.With key supports at $59&$58 if these are taken out,look out below.Gold is also testing a triple bottom at $540.So both these commodities are sitting right on the abyss,the next 2 weeks will be interesting.Uranium reaching $40 is an all important physiological milestone, and is a very positive note.I,myself and me,believe we are at a very important time.Will uranium stocks show the $40 value or will they tumble if gold and oil roll over.Then there is the Iran situation,if that comes front row and centre.Gold & oil will explode upward.So many variables at this juncture in time.So will see said the blindman to the deaf mute with no ears!
It is a simple matter. Hedge funds are making money simply by manipulating the CCJ price. They sell these call options for a high premium to clueless investors and then hammer the price down so the call options expire worthless. Stay away from call options, you're just going to lose money...... If you want to particpate in CCJ, best way is to just buy the stock and forget about it for 10-20 years. Otherwise don't even think about investing. CCJ can go down a lot more than it already has.
CCJ seems to be affected, short term, by the general mood about commodities and especially energy prices, so it's getting whacked because natural gas is taking gas, despite the fact that spot uranium is now up to $40.
CCJ doesn't sell into the spot market, but they claimed in last year's (March, 2005) annual report that they would seek a majority of contracts with spot price adjustments. Still, it should be a while before spot prices have a big impact on CCJ's earnings.
Long term, CCJ should do just fine. We just need to keep an eye on production vs. demand. Production will likely ramp up to exceed demand because of a huge price increase, then the price will collapse again just as in the '60's and '70's. That's when we take our profits. I'll bet that event is about 5 years away. Meanwhile, enjoy!