Uranium stocks are booming, thanks to Trump
Uranium stocks are, uhhh, going nuclear lately thanks to hopes that Donald Trump and his administration will be more willing to invest in nuclear power.
http://money.cnn.com/2017/01/20/investing/nuclear-power-uranium-stocks-donald-trump/
The Global X Uranium ETF (URA), a basket of several big uranium mining stocks, is up nearly 40% since Election Day.
The fund has soared more than 25% this year alone -- despite the fact that its largest holding, Canadian uranium miner Cameco (CCJ), plunged nearly 20% on Wednesday after warning of a loss due to lower production at a mine in Kazakhstan.
Cameco also announced that it will be cutting more than 100 jobs at mines in Saskatchewan.
But Cameco's stock, even with the drubbing it took earlier this week,
is still up more than 15% this year. It rebounded sharply on Thursday
and Friday.
The optimism seems almost entirely due to Trump.
In an interview with Canada's BNN network this week, Cameco CEO Tim
Gitzel said that "we've heard some encouraging words from the Trump team
on nuclear power. We're optimistic that will help our nuclear
industry."
Related: The biggest winners and losers from Trumponomics
So far, Trump hasn't said much about investing in nuclear power since
the election. His most notable comment about nuclear energy was actually
a tweet about nuclear weapons a few days before Christmas.
Trump wrote that "the United States must greatly strengthen and expand
its nuclear capability until such time as the world comes to its senses
regarding nukes."
Trump's energy secretary nominee Rick Perry,
the former governor of oil-rich Texas, hasn't talked much about nuclear
power either.
But investors are clinging to the hope that Trump
is pro-nuclear power, partly because of comments he made nearly six
years ago after the meltdown at Japan's Fukushima Daiichi plant in March
2011 after an earthquake hit the area.
"I'm in favor of nuclear energy, very strongly in favor of nuclear energy," Trump said in an appearance on Fox News. "If a plane goes down people keep flying. If you get into an auto crash people keep driving."
Bloomberg also reported last month
that members of Trump's transition team have reached out to the Energy
Department about finding ways to help keep more nuclear power plants
running.
Several large plants have already closed. And Entergy (ETR)
recently reached an agreement with New York state to shut down the
Indian Point nuclear power plant near New York City by 2021.
So
the fact that Trump appears to be committed to keeping the industry
alive is being viewed as a significant win by investors.
But
the uranium industry is as volatile as some of the compounds derived
from the radioactive element. Investors need to be careful.
Many of the top holdings in the uranium ETF, which also includes NexGen (NXGEF) and Denison Mines (DNN), are relatively small penny stocks.
And even if Trump does wind up committing to more investments in
nuclear energy, it's unlikely that he's going to abandon traditional
fossil fuels.
In fact, many oil stocks have rallied since Trump
beat Hillary Clinton on the hopes that Trump will pursue policies that
are favorable for the likes of ExxonMobil (XOM), Chevron (CVX) and U.S. shale gas producers EOG (EOG) and Devon Energy (DVN).
Related: Exxon playing catch-up in shale oil business
Trump's selection of former ExxonMobil CEO Rex Tillerson to be his
secretary of state has made oil investors even more excited about the
prospects for more domestic drilling in the next few years.
ExxonMobil just made a big investment in shale this week, scooping up
assets in the Permian Basin of Texas and New Mexico for $5.6 billion.
If President-elect Donald Trump is able to get the economy growing at a faster clip, many giants of Corporate America will benefit. But there will also be some notable losers.
The biggest beneficiaries are likely to be the companies that generate an overwhelming majority of their sales domestically.
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According to data from FactSet Research, nearly half of the companies in the S&P 500 index (240 to be precise) get more than 70% of their annual sales from the U.S.
That list includes AT&T (T, Tech30) and Verizon (VZ, Tech30), Disney (DIS), Comcast (CMCSA) and Home Depot (HD).
Berkshire Hathaway (BRKB) and Starbucks (SBUX) are also on it. So is defense contractor Lockheed Martin (LMT), which has been a target of angry Trump tweets because of the cost of the F-35 jet.
Walmart (WMT), American Express (AXP), UPS (UPS) and Netflix (NFLX, Tech30) are other high-profile companies that are all expanding abroad, but whose profits are still more closely tied to the U.S.
Related: Corona has a Trump-Mexico problem
These companies could get a lift from Trump's inward-looking policies if he and the Republican-led Congress boost funding for infrastructure projects and cut taxes as much as they are proposing.This stimulus could lead to higher levels of consumer and big business spending.
That could also help Ford (F) and GM (GM) somewhat. Those companies, who have also been targets of Trump for operations they have in Mexico, each get a little more than 60% of their revenue from the U.S.
Of course, there is no guarantee that Trump is going to get everything he wants from Congress. There's also the possibility that economic isolationism backfires and winds up hurting economic growth and U.S. consumers.
Potential Losers
Many big U.S. companies that rely heavily on foreign sales stand to lose if Trump's tough talk on tariffs winds up igniting a trade war.Boeing (BA) generates nearly 60% of its sales from outside the U.S.
GE (GE), Coke (KO), McDonald's (MCD), Procter & Gamble (PG) and Nike (NKE) sell more of their products abroad than in the U.S. So it's possible that those stocks could lag versus those with more of a U.S. presence -- especially if the dollar picks up more steam.
Although the dollar has started to weaken lately as Trump tries to talk it down, the greenback is still up significantly against other currencies since his election.
Related: IMF thinks Trump stimulus will boost U.S. growth
Investors think Trump's domestic focus should boost the dollar, which is bad for companies that sell more of their goods and services abroad -- and good for those which import less and focus on the U.S.That could hurt big tech firms Apple (AAPL, Tech30), Microsoft (MSFT, Tech30), Facebook (FB, Tech30) and Google-owner Alphabet (GOOGL, Tech30), which also get more than half their revenue from international markets. So do Intel (INTC, Tech30), Oracle (ORCL, Tech30) and IBM (IBM, Tech30).
But these and other tech stocks have actually led the market lately due to hopes that Trump's proposed corporate tax changes will lead them to bring more cash that they have sitting overseas back to the U.S.
The bet is that Apple and other giant tech firms may use that cash to hire more workers in the U.S., increase their dividends and buy back stock.
That may be true, but these tech companies may also find it tougher to do business internationally if foreign governments retaliate against Trump with their own tariffs on U.S exports.
Related: Trump's trade threats have CEOs running scared
Another potential laggard? Oil giant ExxonMobil (XOM), whose former CEO Rex Tillerson is Trump's choice to be Secretary of State.ExxonMobil generated only a little more than a third of its overall sales in the U.S. in its most recent fiscal year.
So unless oil prices skyrocket under Trump, it may not benefit as much from Trump's policies as other energy companies that have already positioned themselves to cash in on the U.S. shale boom.
Under Tillerson's watch, ExxonMobil invested a lot more in oil reserves in deep-sea fields as well as the Russian Arctic region. It now seems to be playing catch up back in the U.S.
ExxonMobil just announced plans this week to buy shale oil assets in the Permian Basin of Texas and New Mexico for $5.6 billion.
Rex Tillerson's replacement at ExxonMobil is already taking more of an "America First" stance.
http://money.cnn.com/2017/01/17/investing/exxon-buys-permian-basin-shale-oil/index.html?iid=EL
Just two weeks after Tillerson left to focus on his nomination as President-elect Donald Trump's secretary of state, Exxon CEO Darren Woods is making a quick mark on the company by purchasing a slew of U.S. shale oil resources.
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The purchase from the Bass family of Texas represents an effort by Woods to help Exxon catch up after it fell badly behind in the U.S. shale oil boom during Tillerson's decade in charge.
Instead of seizing on the explosion of American oil production, Tillerson trained Exxon's sights on foreign oil projects in Russia, Iraq and off the coast of Africa. Similarly, Exxon's other big rival Chevron (CVX) was also late to the shale oil party. That left the field open to younger, and more nimble, oil companies that flourished during one of the biggest oil booms in history, one that has changed the global map of oil producing countries in the past decade.
Exxon now says that the latest purchase has the potential for 3.4
billion barrels of oil equivalent output. Exxon said the resources lie
in a "highly prolific, oil-prone" part of the Permian Basin and will
double the company's assets in the Permian.
"ExxonMobil has been late to invest in shale to their detriment," said
Brian Youngberg, an analyst who covers Exxon at Edward Jones.
But Youngberg said the deal shows Exxon is "trying to play catch-up and wants the highest quality" assets.
The Permian has proven to be the most resilient part of America's vast
shale oil empire. Even during today's relatively low prices -- the
current price of $53 a barrel is just half the level of three years ago
-- frackers in the Permian are still pumping away profitably.
Woods, the new Exxon CEO, noted that these shale oilfields have a track
record of generating "attractive returns in a low-price environment."
He said the investment will bolster the company's presence in the
"dominant U.S. growth area" for onshore oil pumping.
It's the biggest acquisition for Exxon since the massive 2010 deal to
buy XTO Energy for $41 billion. XTO was a major natural gas producer and
today the Exxon division pumps lots of shale oil in North Dakota and
Texas.
Of course, Exxon is a bit more strapped for cash these days. Exxon's long-term debt has quadrupled to nearly $30 billion even as its profits have tumbled to 17-year lows amid the crash in oil prices.
Exxon's financial pressure has resulted in the loss of its once-perfect AAA credit rating.
That explains why Exxon is paying for the Permian assets by using the company's stock.
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