The spot price of uranium has skyrocketed because of the worldwide nuclear power build out. Right now it’s trading at about $113 per pound. You might remember Cramer recommending Energy Metals back on Feb. 22 as a play on this market. Well, that stock’s up over 12% since. Tonight, because it’s Friday, he’s got two much more speculative uranium plays that might be worth a look.
You might not know that it’s possible to extract uranium from phosphate – yes, the same phosphate used in fertilizer – but it’s doable. It can cost as much as $50 a pound, but with uranium prices where they are right now, it’s still a viable operation. Mosaic and CF Industries are both poised to profit off this trend.
Mosaic is the largest producer of phosphates on earth, Cramer says, even bigger than the next three closest competitors combined. CF was upgraded this morning by Bank of America for just the reason that Cramer’s recommending it today: its potential to extract uranium from phosphate. CF is up big off the upgrade, but it’s a speculative play, and Cramer doesn’t see much trouble with buying it even after today’s jump.
Now, the thing to keep in mind is that CF and MOS shut down their uranium operations once the Cold War was over. The demand for the product dropped, and so did the price of oil. So the risk involved depends upon whether the companies will start up these operations again and uranium stays above $50 a pound.
So Cramer recommends buying in now before the market starts to price in the new upside for these two companies – but only if you want to speculate on the growing number of nuclear power plants worldwide and the resultant growing demand for uranium. Both stocks are already benefiting from being in the sweet spot for the current agriculture cycle because of their fertilizer exposure, and Mosaic is up 35% from where Cramer got behind it on Dec. 8, 2006.
Bottom Line: The best way to profit off high uranium prices, if you can take the heat of speculation, comes from two fertilizer companies with a lot of phosphates: Mosaic and CF Industries.
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