When you open a forum to review retail investor sentiment toward a publicly traded company and you are instead bombarded with questionable gifs of the female anatomy, you know something isn’t quite right. Well, that’s the experience behind uranium specialist Denison Mines (NYSEAMERICAN:DNN) stock and its StockTwits profile.
I’m not entirely sure what mammary glands have to do with DNN stock, but it poses a problem.
No, I’m not a prude – although I will say that it’s a basic courtesy to let people know about “NSFW” content ahead of time, geez! Some of us would like to stay married. Anyways, the issue with DNN stock is the guilt-by-association phenomenon that is surely brewing by now. When the only reason people are buying Denison shares is hormonal, that’s not a great advertisement for the investment thesis.
I’ll admit that I’m not entirely sure what the definition of a meme stock is. But if I had to guess, Denison Mines seems to qualify. First, you have a very low price – just a few cents above a buck at time of writing. Second, it has either a strong social media presence or a cult following.
Finally, you have completely nonsensical reasons for buying DNN stock. To be clear, I’m not suggesting that everyone on social media buying these shares is doing so solely based on a Pavlovian response. But I’ve seen enough dancing ladies – and some dudes – to realize that we may not be playing with a full deck.
Still, credit for diversity and inclusion. However, most (rational) investors need a little more meat on the table before considering DNN stock.
That’s the unfortunate thing about Denison. While social media has become the new approach to buying shares, there’s actual substance with DNN stock. If you can ignore the noise, you’ll find a compelling high-risk, high-reward opportunity here.
DNN Stock Enjoys Positive Fundamentals
Besides the social media nonsense, the other big concern that weighs on DNN stock and its rivals like Cameco (NYSE:CCJ) is the underlying asset. Uranium isn’t exactly a feel-good story because of what can go wrong when you have a meltdown (literally).
Still, the big reason why you should take more than a passing glance at DNN stock is what the kids call the maths. If facts don’t care about your feelings, then math really doesn’t give a flying unit of fecal matter about feelings, initiatives, synergies and whatever other buzzwords you want to throw in there.
Here’s the comparison that matters – pound for pound, uranium provides 16,000 times more electricity than coal. Of course, this all comes down to energy density. Per a unit of mass, uranium simply has more energy potential than other resources we use. Indeed, energy density is exactly what keeps combustion engines relevant, despite electric vehicle manufacturers throwing everything and the kitchen sink at the “analog” automotive industry.
Not only that, our good friends at the Office of Nuclear Energy states that nuclear power is the most reliable energy source and it’s not even close. Thanks to lower maintenance requirements and longer operating spans before requiring refueling, nuclear power plants are able to achieve a capacity factor of 92.5%. The next closest is geothermal power plants, which have a capacity factor of 74.3%.
As you might expect, wind and solar are practically subterranean in comparison. This is due to their intermittent energy source – the sun isn’t up all day and neither does the wind blow perpetually. Moreover, renewable energy requires a substantial footprint and this goes back to energy density.
One nuclear powerplant can pump out as much electricity as almost two coal plants or three to four renewable plants. This isn’t my opinion – this is a report from a federal agency.
Intriguing Supply Dynamics
Therefore, the U.S. and the rest of the world can cry all they want about renewable energy and going green. Don’t get me wrong – these are noble ideas. Perhaps in the future, renewable technology and battery storage innovations will advance to the point where they can completely replace all other powerplants.
In the meantime, nuclear is at least part of the equation because of the numbers. Again, a 16,000x power output advantage is not something that you can ignore, either mathematically or economically.
But there’s another reason to consider DNN stock and that has to do with supply. According to the U.S. Energy Information Administration, U.S. uranium production fell to an all-time annual low in 2019. In part, this may be due to the politics of uranium.
However, as America increases in population size due to natural reasons and immigration, electric energy demand will only rise higher. In addition, the push to electrify everything won’t happen in a vacuum. Someone’s got to provide that power and I’m sorry but it’s not going to all come from windy days.
Uranium is the only commodity that makes sense here and thus, DNN stock finds itself in a compelling fundamental position. That’s not to say there aren’t risks here – uranium mining has been a disappointing sector for years. But things change and that change may possibly favor Denison Mines.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.