Question: Please give me the top three uranium stocks you would recommend. Thank you. — Eric
Forget gold or crude oil — the growing interest in commodities has sparked a rush into uranium, pushing prices up some 400% since 2000. In many ways, the time is right for a continued bull market. Paranoia over nuclear energy, born from the 1979 accident at Three Mile Island, has subsided, and politicians and investors are once again waking up to the fact that nuclear energy is clean, inexpensive and surprisingly safe. Moreover, although companies are frantically looking for more supplies, it takes years to successfully excavate uranium from the ground. Demand is outstripping supply.
Many of the uranium mining companies trade in Canada, the international hub for metals and mining. The industry leader, however, is listed right here in the United States. Cameco Corporation (CCJ) engages in the exploration, development, mining, refining, and conversion of uranium that is used as fuel for generating electricity in nuclear power reactors worldwide. The company operates four uranium mines in Canada and the United States, as well as two uranium mines under development in Canada and central Asia.
You might also take a look at USEC, Inc. (USU), which supplies low enriched uranium for commercial nuclear power plants worldwide. The company performs contract work for the Department of Energy and general nuclear consulting services such as planning, market research and analysis. My hedge fund has no position in either of these stocks at this time.
Question: What is your position on TXN and LSI Logic? What is your 12-month projected price for both? — Dale
While not the monster growth stocks they were back in the late 1990s, semiconductors like Texas Instruments (TXN) and LSI Logic (LSI) have enjoyed strong stock gains in recent months, thanks to improved business conditions and a rally in the overall sector.
Founded in 1930, Texas Instruments operates in three segments: semiconductors, sensors/controls and educational. The company's semiconductors are used in everything from computers to cars, while the sensors business designs applications for HVAC equipment and other industrial uses. If you took high school algebra in the last 30 or so years, you're probably familiar with their educational segment, which has long produced a line of highly popular handheld calculators. I'm impressed with TXN's market strength action, and while I don't set target prices, a continued rally in tech stocks could see TXN back near $40 per share, up from $32 today. My hedge fund has no position in the stock.
LSI Logic (LSI) recently announced plans to focus its business in two areas: consumer markets and storage. The consumer business revolves around the explosion in digital entertainment that is rapidly becoming part of everyday life. The company's products are found in video game consoles, DVD recorders, HDTVs and home media servers.
They've also continued to focus on the storage business, providing a broad range of products including custom silicon, standard silicon and software. As part of the recent restructuring, non-core businesses are being sold or wound down. The market seems to like the news, sending LSI's stock up 10 percent in March alone.
At $11 per share, the stock is still a long way off from its 2000 high of $90 per share, but more proactive steps from the company could easily push the stock up another 25 percent from current levels. It's hard to be a bear on this one, although my hedge fund has no position in LSI at this time. As always, trade with prudence and in accordance with your own tolerance for risk.
Question: Do you think, now that the baby boomers are reaching a mature age and have more money to invest, that the Dow will go over 13,000 by this time next year? — Robert (Chattanooga, Tennessee)
For most of the past decade or so, the thought was that the baby boomer's retirement would hurt stocks. Many noted analysts suggested that, because retirees typically move into less aggressive investments, baby boomers retiring would push stock prices lower and bond prices higher.
I've found the process of trying to match demographic shifts with stock market movement to be a completely fruitless affair. In order for the Dow to hit 13,000 points, it would have to rise by about 17 percent from current levels. And while it certainly might happen, it's not going to be the maturing of the baby boomers that prompts the move. Watching the market's price action, or even its fundamental outlook, will provide much better clues into future performance than estimating how the baby boom generation may or may not invest.
Question: What are your best picks for the new nanotechnology stocks? I currently invest in PXN. — Carl (Christiansted, St Croix VI)
Although I'm not invested in the sector, there's no denying it has captured a great deal of investor interest in recent years. Shortly put, nanotechnology is small technology that occurs at the nanometer scale, which is the size of atoms and small molecules. As a discipline within material science, the field's potential appears vast. Thankfully, there are a number of companies working hard to earn a piece of the pie.
Out of the dozens of speculative and early-stage “nanotech plays” out there, I actaully think your position in PXN makes the most sense. For those who don't speak in “ticker,” PXN is the PowerShares Lux Nanotech Portfolio, an exchange-traded-fund (ETF) that trades all day long on the American Stock Exchange. The fund smartly diversifies the risk of any one particular company by holding stakes in 26 different firms. Nanophase Technlologies (NANX), Accelrys Inc (ACCL) and Harris & Harris (TINY) are all included in the fund, which yields almost 1.5 percent and isn't trading too far off from its yearly high of $18.84 per share. Until the industry matures and more leadership evolves, a diversified approach is likely your best bet.
Question: I have shares of Lucent (LU) and understand that the pending merger with Alcatel (ALA) will not take place for several months. What should I be looking for? Obviously, I would like to sell at the highest possible price. Should I just let the merger take place and let my shares convert? Also, could you give any insight on Nortel (NT)? — Wallace
If you hold shares of Lucent (LU), you should now be closely watching shares of Alcatel, traded in the states as (ALA). Under terms of the deal, Lucent shareholders will receive 0.1952 of an Alcatel share for each common share of Lucent they own — worth a little less than $3.00 based on Alcatel's current $15.40 value.
Whether you should sell or not depends on your outlook for the new combined Alcatel/Lucent. The company will generate annual sales of $25 billion dollars and command an 18 percent share of the telecom equipment market. The diversity of revenues between North America, Europe and Asia is another advantage few competitors can match.
Company leaders have pledged to streamline costs, and up to 10 percent of the combined workforce will likely be let go once the deal closes. And while the industry continues to consolidate, I personally don't find Alcatel to be an attractive stock for purchase at this time. Assuming your position in Lucent is a modest one, you might consider holding onto Alcatel for the long haul. But if you are heavily exposed, I'd think about reallocating assets to a more timely trade.
Nortel, another low-single digit telecom play, isn't on my list either. While the stock might seem a bargain at $2.83 per share, cheap stocks are usually cheap for a reason. While they certainly provide some excitement whenever they tick up or down a dime, I've never had much luck making money in those types of trades. Good luck!
Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC. He appears regularly on FNC's business program Cashin' In. At the time of writing, Hoeing’s fund held no positions in any of the securities mentioned.