- Money Morning Australia

Uranium Stocks – The Restricted Aussie Export That Could Make You Money


Written on 14 February 2012 by Kris Sayce

“Mr Shorten said managers needed to do more to improve employee engagement to lift performance and productivity rather than just blame Labor’s Fair Work Act and the unions for their troubles.” – Australian Financial Review, 13 February

That’s rich. For a government to accuse the private sector of being unproductive.

It’s the old pot and kettle situation.

Governments are not only unproductive and inefficient, but thanks to their meddling they harm private sector productivity too.

The fact is most (but not all) businesses achieve success despite government meddling. Not because of it. And there are even some businesses that seem to revel in it.

Why? Because the potential reward is so great that even the pen-pushers can’t put them out of business.


In a moment we’ll discuss the devil-may-care industry that time and again has made investors big returns over the past 20 years.

But first…

Keeping Cheese In, And Rubbers Out

 


You only have to read the list of import and export restrictions to see the hoops Aussie firms have to jump through to stay on the right side of government red tape.

Want to export “cameras or imaging systems for use underwater”? Forget about it. Unless you’ve got a permit from Defence Department and the Department for Foreign Affairs & Trade.

What about butter, cheese or yoghurt? Make sure you’ve got a permit from the Department of Agriculture, Fisheries & Food (DAFF). Think of the turmoil if people started exporting butter without government say-so!

And if you’ve ever wondered why Australia doesn’t have a bigger presence in the “sausage casings” industry, maybe it’s because you need a meat permit from DAFF before you even think about flying the flag for Aussie sausage casings.

But it’s not just export regulations pinning down Aussie businesses. Be careful what you import too. You’ll be pleased to know the Aussie government restricts the import of “Erasers resembling food in scent or appearance”.

Australia is the last bastion in the fight against novelty erasers. (If you think we’re kidding, check out this link.)

No wonder so many Aussie firms are going bust and laying off workers.

Yet why is it some businesses can overcome these restrictions while others can’t?

The resources sector is a perfect example of a red-tape-beating industry. Australia has a bunch of resources in high demand. And there are few other major competitors. In fact, Australia has huge resources of pretty much every bulk and specialty commodity there is.

That’s not the same for other Aussie industries where there’s plenty of global competition.

And that’s what makes it harder for those industries to compete. It’s not because of extreme capitalists earning a fast buck at the expense of workers. But because high costs and red tape makes it hard for Aussie firms to compete.

But as we say, red tape doesn’t stop everyone.
There are entrepreneurs and capitalists willing to invest time and money in one of the world’s most controversial and restricted industries – uranium.

At face value, you’d have to be mad to even bother about looking for and producing uranium…

There’s the cost of finding a resource and proving it’s viable. There’s the cost and red tape to dig the stuff up. The environmental concerns. The limited list of countries you can export uranium to. And of course there are security concerns.

You’d think there would be an easier way to make money. And there is. But few other sectors provide as much bang for your buck as uranium.

Boom or Bust

 


When the uranium sector booms it booms. Uranium stock gains of 20%, 40% or 50% in just a few days aren’t uncommon. And over the past 20 years we’ve seen uranium stocks make big triple- and even quadruple-digit gains in months.

Put just $500 into a uranium stock before it booms and you could cash-out with $5,000 or more just a few months later. But, there is a flipside. When uranium stocks lose favour with investors, the bust is just as spectacular.

You only have to look at the long-term chart of two Aussie uranium stocks to see what we mean – Energy Resources of Australia [ASX: ERA] and Extract Resources [ASX: EXT]:

Energy Resources of Australia [ASX: ERA] and Extract Resources [ASX: EXT]
Click here to enlarge
Source: Google Finance

 


Bottom line: uranium stocks are a great way to make a bunch of money (if you get the timing right). And a great way to lose a lot of money if you get the timing wrong.

But at the moment, our old pal, Diggers & Drillers editor, Dr. Alex Cowie says it’s a great time to speculate on uranium stocks. To the extent he has two open tips on his recommended buy list for subscribers.

In a recent update he wrote:

“When things get sticky for oil, uranium starts looking like a better alternative. In the last few weeks, major uranium stocks have started to pick up significantly. Australia’s largest uranium stock, Paladin (ASX: PDN), is now up 30% since the start of the year. One of Canada’s majors, Uranium One (TSE: UUU) is up 29%.”

Is the rally over? Not according to the Doc. He says, “…institutional investors are recognising deep value in the sector, after prices were overly crucified in the wake of the Fukushima disaster last year.”
(There’s more from the Doc below.)

Add Uranium to Your Portfolio

 


It goes to show you that if the potential profits are good enough, no amount of government meddling and red tape will stop a good idea from making money. The uranium sector is proof of that.

Unfortunately, red tape ties up many other Aussie businesses. But they don’t have the benefit of big profit margins. Simply because in a competitive world where consumers and other businesses can buy a similar product elsewhere, Aussie firms just can’t compete.

So if you’re looking for a big winner, the secret is to punt on stocks where Australia has a competitive advantage. That remains what it has always been: the resources sector… and given current prices, and if the Doc is right, uranium stocks should be at the top of your buy list.

Cheers.
Kris.

P.S. Dr. Cowie says uranium stocks are great value at the moment. And even after some recent gains in the sector, both the Doc’s tips are still in the buy zone. If you’d like to check them out and register for a no obligation trial subscription, click here for details…

Related Articles

The Conference of the Year for Australian Investors

Will These Commodities Help You Claim The Best Investment Gains Of 2012?

Why Tungsten and Other Strategic Metals Could Prove Good Investments


Leave a Comment

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.

If you would prefer to email the editor, you can do so by sending an email to moneymorning@moneymorning.com.au


TESTIMONIALS

"I think you're fantastic! I love to read what you write...you're so interesting and amusing and I've learned so much" -
Money Morning reader, Chris Gadd

"You guys are brilliant. I feel more relaxed about the future than ever simply because I know what is going on rather than floundering around with smoke screens and mirrors from the government and mainstream" -
Money Morning reader, Helen Carter

"Wow what can I say? I was an economically confused moron until I read your newsletter and even though I've been a subscriber for a short period I can now see how easy it is to understand, if you use common sense and can have the spin translated into everyday language. Thanks for an entertaining read." -
Money Morning reader, John

"Keep up the good independent and well thought out articles offering a view that often debunks mainstream myths." -
Money Morning reader, Craig

"I do admire your straight talking and simple analysis of the situation, I think of you as the Jeremy Clarkson of finance." -
Money Morning reader, Jeffery

openX sidebar signup form
Openx pos2
Latest Stock Market Updates
  • ^NDX4317.988+29.759 - +0.69%
  • ^FTSE6723.42-5.75 - -0.09%
  • ^AORD5302.100-79.300 - -1.47%
  • ^AXJO5317.500-83.400 - -1.54%
  • AUDUSD=X0.8491
  • USDJPY=X118.285
openX sidebar banner
Openx pos7
Iron ore leadgen
WWD dvd

World War D was billed as ‘the biggest investment summit of the decade’

It didn’t disappoint…


Absolutely mind-blowing beyond my expectations

– D.A.C. Hall


The BEST INFORMATION available,
contrary to mainstream economic reporting.

– L. Sceresini


Exciting, dynamic, passionate, informative, challenging, so professional... Brain-stretching.

– D Finlay


Click here to watch
the brand new Highlights Reel.

Blue Chips

Receive our unique and useful investments ideas straight to your inbox for FREE, enter your email to sign up:

x