I wrote an investment idea for Zacks.com last spring that discussed the benefits of nuclear as an alternative energy. But about a week later, a tsunami ripped across the coast line of Japan, hitting a nuclear facility and setting off renewed concern about the health and environmental implications of this advanced technology.
Needless to say, critics of nuclear energy came swarming out of the woodwork on the news, condemning it as being too high risk for human beings and the environment. But now that the dust has settled a bit, I wanted to circle back around and see how the sector and various companies are holding up.
Global Energy Crisis
At the very top, the world is dealing with a serious energy crisis. But don't take it from me, go ahead and turn to the International Energy Agency out of Paris, saying that 'There are few signs that the urgently needed change in direction in global energy trends is underway.'
Wind and Solar are a Joke
That news comes on the heels of a recent push to develop wind and solar energy resources, providing hope for many that a new wave of 'green' energy will hit the Street and change the scene. Well let's get back to reality for a second. Wind and solar are both insanely expensive and not particularly scalable, still struggling to make any dent in total energy production.
So unless the Federal government has a few trillion Dollars laying around to install wind and solar farms all across the country and develop an infrastructure to distribute, support and store it, neither is a viable option to displace fossil fuels.
Which is exactly why the International Energy Agency is suggesting that governments embrace nuclear energy. Because it is cheap, scalable, and most of all, produces zero emissions. Here's what the agency said;
The World Needs Nuclear Power
'A low-nuclear future would also boost demand for fossil fuels: The net result would be to put additional upward pressure on energy prices, raise additional concerns about energy security and make it harder and more expensive to combat climate change.'
So with the global energy picture becoming increasingly dire, the question isn't wether the world wants to reject nuclear, its CAN the world live without it?
If the answer to that question is no, then this is a good time to be looking at nuclear stocks. Because as Warren Buffet says, be greedy when others are fearful. And the market has clearly had a fairly emotional response to what happened in Japan, beating nuclear stocks into the ground while earnings help up much stronger. So let's go ahead and take a look at four stocks that will benefit from a rebirth in the nuclear story.
Top 4 Nuclear Stocks
Shaw Group, Inc. (NYSE:SHAW - News) designs and builds nuclear plants and facilities and has a market cap of $1.6 billion. Shares have taken a beating over the last 8 months, falling from $44 to $23. But in spite of that downward pressure, estimates have held up pretty well, currently trading at less than 10X forward earnings. And with a PEG ratio of .6, SHAW is trading well below its medium PEG of the last 10 years of 1.4. So it could be a chance to step in and buy a stock that has a solid valuation while the rest of the market yawns with a lack of interest.
Energy Solutions (NYSE:ES - News) is a highly specialized company, offering waste transport and management services to the nuclear industry with a market cap of $256 million. ES has also been weak over the last 9 months, falling from over $7 to below $3. But with the next-year estimate calling for earnings of 32 cents, shares trade at just 9X forward earnings. And with barriers to entrance, this company also looks well insulated from competition.
Scana Group (NYSE:SCG - News) would be the most conservative nuclear play on our list, an electric utility that owns a few nuclear plants. The company has a market cap of $5.6 billion and solid 4.5% dividend. Shares are actually up over the last 9 months, most likely because of its dividend in the volatile market. Looking forward, with footprints in nuclear power generation, this company has the knowledge and infrastructure to be a leading player in the space.
Urranium Resources, Inc. (NasdaqCM:URRE - News) is a micro cap uranium miner, with a market cap of $75 million. But that belies the company's status in the uranium market, where it has one of the worlds largest supplies of the special ingredient required for nuclear energy production. Shares have been hammered, currently trading at just 80 cents, but with an all-time high over $15, this is a great high-risk, high-reward pick out of nuclear.
The market hates nuclear stocks right now, so act like Warren Buffet and be greedy when others are fearful.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
More From Zacks.com
- nuclear energy