Since the disaster at Tepco’s Fukushima reactor back n 2011, nuclear energy has pretty much been relegated to the bargain bin by investors when it comes to energy stocks. That castaway status can be attributed to lower cost alternatives — such as natural gas — plant closures, cost overruns at existing plants and general popular distain for nuclear energy.The thing is, the world needs nuclear power, and the emerging world knows it.
Electricity demand is already increasing at twice the speed of overall energy use. By the time the calendar rolls over to 2035, it will have grown by more than 66%.
The vast bulk of the demand is coming from emerging market nations. And with more nations embracing carbon regulation or limiting rules, nuclear energy is being pushed into the driving seat as it’s the only large-scale way to produce electricity in an environmentally nonthreatening way.
So it’s no wonder why the World Nuclear Energy Association data shows that there are more than 60 new reactors currently under construction, 150 in planning stages and an additional 330 that have been proposed. Again, the vast bulk of them are in emerging market nations.
Nuclear energy stocks maybe in the bargain bin today. However, in the longer term, the sector is ripe for profits as more emerging market nations embrace the power form. Here are three nuclear energy plays to buy today.
Nuclear Energy Stocks To Buy: Cameco Corporation (CCJ)
All nuclear energy needs uranium. And beaten-down miner Cameco Corporation (CCJ) has uranium in spades.
CCJ is currently sitting on 429 million pounds of proven and probable uranium reserves from its mines in Canada, the United States and Kazakhstan. All in all, Cameco accounts for roughly 16% of the world’s entire production of the mineral.
Those reserves put CCJ in a prime position to continue profiting from any reactor buildouts across the globe.
And already, CCJ has racked up some pretty impressive supply deals with some of the biggest demanders of uranium. Cameco previously signed an agreement to deliver more than 50 million pounds of uranium to China by 2025 and more recently, signed a contract to deliver 7.1 million pounds of uranium through 2020 to India. As those nations continue to expand their nuclear energy programs, CCJ will get the call to supply the facilities.
The rub is that CCJ stock is trading for peanuts. Investors can now snag shares of CCJ at lows not seen since 2004.
Lower oil and natural gas prices have punished CCJ shares, as have charges that it has failed to properly account for taxes in tis Swiss subsidiary. However, both of those items have unfairly crunched shares. Value investors can now buy CCJ at roughly book value with a healthy 2.5% dividend yield.
Nuclear Energy Stocks To Buy: BWX Technologies (BWXT)
BWX Technologies (BWXT) is a spin-off of a spin-off, but it may be one of the best nuclear energy stocks for playing the global reactor buildout. At the beginning of July, BWXT broke free of Babcock & Wilcox Enterprises (BW) — which technically broke free of McDermott International (MDR) years ago.
BW was one of the largest heavy construction firms dedicated to power-plant building, including coal, steam generation, waste-to-energy and nuclear power. The new BWXT houses the faster-growing nuclear construction area of the former company and offers a pure-play on reactor construction.
BWXT’s name is new, but that doesn’t mean it’s a slouch in the nuclear energy sector. It has built plenty of reactors and supplies component and replacement parts to countless others
The biggest catalyst for BWXT is the recent trade deal between the U.S. and India. That deal will enable India to buy reactor technology from the U.S., and as the largest pure-player, BWX Technologies will be the biggest winner from India’s rollout of nuclear.
Post spinoff BWXT currently trades for a forward P/E of 16.8 and sports a 1.6% dividend yield.
Nuclear Energy Stocks To Buy: Flowserve (FLS)
The heart of a nuclear reactor is water. And the two varieties of reactors — boiling water reactors (BWRs) and pressurized water reactors (PWRs) — use a ton of it. That’s where Flowserve (FLS) comes in.
FLS makes a whole host of pumps, values and seals for a variety of industries and sectors. When it comes to nuclear energy, Flowserve has been in the forefront of the industry and provided the pumping and sealing technology used in some of the first reactors built in the U.S. Since then, FLS has expanded its product line across the entire nuclear energy value chain.
Flowserve still remains one of the go-to OEMs when it comes to nuclear industry.
The beauty for FLS investors is that about 80% of its revenue are short-term and reoccurring products. Seals, values and the like need to be replaced ever so often. That provides a steady source of profits after the initial purchase of its pumps. And given the harsh conditions inside a reactor and potential dangers if left unintended, FLS’s nuclear division provides a nice base for the company.
FLS stock has been held hostage by its largest business segment: oil and gas. Shares of Flowserve have basically been cut in half as E&P firms have cut their capex spending. However, more than 64% of its bookings come from other sources, meaning FLS is still quite diversified away from oil and gas.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.