Prediction: Cameco Will Soar Over the Next 10 Years. Here's 1 Reason Why.
Energy policy, particularly regarding renewables and nuclear energy, tends to behave like an oil tanker; it takes a long time to turn around, but when it does, it gains significant momentum.
That's how investors might view investing in the nuclear industry, particularly a company like Cameco (NYSE: CCJ), which specializes in uranium, fuel services, and nuclear power technology and services. Here's why the stock makes sense for long-term investors now.
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Why nuclear power is a great investment
This may seem like a peculiar argument, but hear me out. Nuclear power will grow precisely because policymakers will continue to favor investment in renewables. The argument rests on the idea that atomic power complements renewable power.
It is complementary in three significant ways. First, they both use zero-carbon emission fuels. Second, they both enable energy security, as they don't rely on fossil fuels obtained elsewhere. Third, and most importantly, nuclear helps compensate for the fundamental intermittency of renewable energy.
Nuclear power is reliable
To illustrate the last point, here are U.S. Department of Energy figures for capacity factor (the power a plant produces compared to its maximum potential during a period without interruption). Nuclear power is so reliable that it produced 18% of the electricity in the United States in 2023 despite accounting for only 8% of the country's total capacity.
|
Energy Source |
Capacity Factor |
|---|---|
|
Nuclear |
92.3% |
|
Geothermal |
59.9% |
|
Natural Gas (combined cycle) |
42.6% |
|
Coal |
34.5% |
|
Hydroelectric |
34.3% |
|
Wnd |
23.4% |
|
Solar |
17.2% |
Data source: U.S. Department of Energy
That reliability is driving investment in nuclear energy, even as investment in renewable energy grows, such that its reliability offsets the intermittency of renewable energy. All of this is excellent news for Cameco, a company that's positioning itself as the leading pure-play investment in nuclear energy.
Image source: Getty Images.
Its mix of uranium production, refining, and conversion services for reactors, along with a 49% stake in the nuclear power services company Westinghouse, makes it a go-to investment option for the growth of the nuclear industry.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.
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