Bullish on energy — and China
NEW YORK (MarketWatch) — The decade’s top performer is still bullish on energy — and on China.
I’ve occasionally whined that Outstanding Investments [OI] editor Byron King rarely provides much macro detail to back up his relentless insistence that energy prices MUST GO UP.
King is not exactly a stopped clock — his focus is micro, on a kaleidoscope of specific stock recommendations — but he’s not as, well, apocalyptically quotable as a predecessor on OI publisher Agora Financials editorial roller coaster, Justin Litle. See April 30, 2007 column .
But maybe King just thinks energy prices MUST GO UP. He had a bad year in 2011 (down 18.3% by Hulbert Financial Digest count vs. a 0.98% gain for the dividend-reinvested Wilshire 5000 Total Stock Market Index XX:W5000FLT +0.30% ). But he was sticking to his guns just as oil prices began their recent rally. See Nov. 17, 2011 column . And OI is still the top-performing letter by HFD count over the last ten years through March, up a remarkable annualized 16.07% vs. 4.95% annualized for the total return Wilshire.
As usual, King doesn’t have much news on the macro front in his latest issue:
“Why is oil expensive? Let me count the ways. Start with world politics. First and foremost, tensions with Iran are driving oil prices up. There’s a risk premium on every barrel of crude that sails out of the Persian Gulf. How much? I’d say that the prospects of military confrontation have added $10 – $20 to the world price of a barrel of oil.
“Then again, oil is a scarce, valuable substance. The world is using more of it. Yes, the ongoing recession has trimmed about 5% or so from U.S. oil demand over the past few years. But that’s more than made up by increasing demand from the rest of the world.”
King has, however, reversed his earlier conviction that the 2011 Japanese tsunami meant that “the nuclear power ‘renaissance’ is over. See March 21, 2011 column.
Now, citing exaggeration of the problems in Japan, at Chernobyl and with the storage of radioactive waste, he concludes:
“Looking over the landscape, it appears that the politics of nuclear power are set up for eventual success. The future of nuclear power is doable, and therefore, it’s investable.”
Nevertheless, King is selling Denison Mines Corp. CA:DML -2.65% and Uranium Participation Corp. URPTF +0.53% , a related investment company (which he notes have been in the OI portfolio since before he became editor). He writes:
“I was hopeful that the fundamentals of the uranium business would prevail. The fact is that the world burns up more uranium every year than the mining community produces… I’ve been expecting that eventually, Denison and Uranium Participation would live up to their business goals and nuclear power potential. That, and I really just wanted for us to make some money off them. Nope. Didn’t happen.”
His explanation:
“What’s going on? Lots of things. With Denison, it seems that management is trying to do too much. Denison is in the uranium business. It’s in the vanadium business. It’s in the U.S. It’s in Canada. It’s in Mongolia. It’s in Zambia. It’s trading uranium oxide on the futures markets, on its own account and through Uranium Participation. One way or another, this kind of management touch just isn’t working for either Denison or Uranium Participation.”
Among nuclear-oriented companies OI does recommend: Cameco Corp. CCJ +1.74% ; Uranium Energy Corp. UEC +0.70% .
And, bucking another macro meme, King thinks that reports of China’s hard landing are premature. See March 22 column.
He writes: “If China is slowing down, then we ought to see it reflected in the price of certain metals.” And, he writes, a slow-down is just not evident in the price of iron or copper.
I’ve occasionally whined that Outstanding Investments [OI] editor Byron King rarely provides much macro detail to back up his relentless insistence that energy prices MUST GO UP.
King is not exactly a stopped clock — his focus is micro, on a kaleidoscope of specific stock recommendations — but he’s not as, well, apocalyptically quotable as a predecessor on OI publisher Agora Financials editorial roller coaster, Justin Litle. See April 30, 2007 column .
But maybe King just thinks energy prices MUST GO UP. He had a bad year in 2011 (down 18.3% by Hulbert Financial Digest count vs. a 0.98% gain for the dividend-reinvested Wilshire 5000 Total Stock Market Index XX:W5000FLT +0.30% ). But he was sticking to his guns just as oil prices began their recent rally. See Nov. 17, 2011 column . And OI is still the top-performing letter by HFD count over the last ten years through March, up a remarkable annualized 16.07% vs. 4.95% annualized for the total return Wilshire.
As usual, King doesn’t have much news on the macro front in his latest issue:
“Why is oil expensive? Let me count the ways. Start with world politics. First and foremost, tensions with Iran are driving oil prices up. There’s a risk premium on every barrel of crude that sails out of the Persian Gulf. How much? I’d say that the prospects of military confrontation have added $10 – $20 to the world price of a barrel of oil.
“Then again, oil is a scarce, valuable substance. The world is using more of it. Yes, the ongoing recession has trimmed about 5% or so from U.S. oil demand over the past few years. But that’s more than made up by increasing demand from the rest of the world.”
King has, however, reversed his earlier conviction that the 2011 Japanese tsunami meant that “the nuclear power ‘renaissance’ is over. See March 21, 2011 column.
Now, citing exaggeration of the problems in Japan, at Chernobyl and with the storage of radioactive waste, he concludes:
“Looking over the landscape, it appears that the politics of nuclear power are set up for eventual success. The future of nuclear power is doable, and therefore, it’s investable.”
Nevertheless, King is selling Denison Mines Corp. CA:DML -2.65% and Uranium Participation Corp. URPTF +0.53% , a related investment company (which he notes have been in the OI portfolio since before he became editor). He writes:
“I was hopeful that the fundamentals of the uranium business would prevail. The fact is that the world burns up more uranium every year than the mining community produces… I’ve been expecting that eventually, Denison and Uranium Participation would live up to their business goals and nuclear power potential. That, and I really just wanted for us to make some money off them. Nope. Didn’t happen.”
His explanation:
“What’s going on? Lots of things. With Denison, it seems that management is trying to do too much. Denison is in the uranium business. It’s in the vanadium business. It’s in the U.S. It’s in Canada. It’s in Mongolia. It’s in Zambia. It’s trading uranium oxide on the futures markets, on its own account and through Uranium Participation. One way or another, this kind of management touch just isn’t working for either Denison or Uranium Participation.”
Among nuclear-oriented companies OI does recommend: Cameco Corp. CCJ +1.74% ; Uranium Energy Corp. UEC +0.70% .
And, bucking another macro meme, King thinks that reports of China’s hard landing are premature. See March 22 column.
He writes: “If China is slowing down, then we ought to see it reflected in the price of certain metals.” And, he writes, a slow-down is just not evident in the price of iron or copper.
Comments
Post a Comment