Why uranium stocks are surging … fast wins from Luke Lango and Eric Fry … is this Bitcoin breakout finally for real? … why valuation has Eric cautious today
Uranium stocks are surging.
Yesterday, we learned that Amazon signed a deal with Dominion Energy to invest more than $500 million in nuclear power. The tech giant’s need for clean energy is spiking due to its AI initiatives.
To make sure we’re all on the same page, AI requires enormous amounts of power. Here’s The Verge with some context:
Training a large language model like GPT-3, for example, is estimated to use just under 1,300 megawatt hours (MWh) of electricity; about as much power as consumed annually by 130 US homes.
To put that in context, streaming an hour of Netflix requires around 0.8 kWh (0.0008 MWh) of electricity. That means you’d have to watch 1,625,000 hours to consume the same amount of power it takes to train GPT-3.
Yesterday’s news follows headlines from last month announcing that Microsoft signed a similar deal with Constellation Energy. It will reopen the Three Mile Island nuclear facility to provide power to help fuel Microsoft’s AI efforts.
And earlier this week, Google reported it will purchase nuclear power from Kairos Power.
If you haven’t been watching, uranium and nuclear technology stocks have been exploding. To illustrate, below, we look at five related investments:
- Global X Uranium ETF (URA)
- Cameco Corp (CCJ)
- Energy Fuels Inc (UUUU)
- Centrus Energy Corp (LEU)
- Oklo Inc (OKLO)
Since September 1, they’re up between 28% and 150%.
Source: StockCharts.com
A quick congratulations to Luke Lango’s Innovation Investor subscribers. Yesterday, they locked in 55% profits on a portion of their investment in NuScale Power (SMR). More impressively, these returns happened in just two weeks.
A second congratulations goes to Eric Fry’s Leverage subscribers. Their call option on URA is now up 38% since they opened it on October 1.
If you’re not already in this move, be careful about initiating a trade today. Here’s Luke from yesterday’s Innovation Investor Daily Notes explaining:
We remain very bullish on nuclear energy stocks. But we also caution against chasing this rally right now.
This feels like peak short-term euphoria for nuclear energy stocks. We’d wait for a pullback to add more exposure.
Big Tech moving in nuclear power is clearly a massive vote for AI, but this doesn’t mean you have a green light to cannonball into every AI investment
Caution remains warranted.
On that note, over the last few days, we’ve been featuring Louis Navellier’s latest AI research. He’s been urging investors to recognize the shift that’s happening within the AI sector:
Recklessly investing in “the first generation” of AI stocks is going to cost you dearly in exactly the kind of financial shift I’ve spend my 47 years on Wall Street predicting again and again.
But the fact is, if you know what’s coming, and what to do, it will be among the best opportunities in 2024 to make serious gains, faster than you can imagine.
We won’t delve into more details on this today, but you access Louis’ research and learn more about this important AI shift right here.
Meanwhile, Bitcoin has been breaking out…but is this just another head fake?
To make sure we’re all on the same page, at the end of September, Bitcoin surged and briefly pushed north of the down-sloping trendline that’s been driving losses since the spring.
Our crypto expert Luke highlighted $64,000 as the key level to watch to determine whether the bullish breakout would hold. If we could turn $64,000 – formerly resistance – into new support, it would be a pattern break for Bitcoin, suggestive of new strength and more gains to come.
Bitcoin failed that test.
The crypto crashed through $64,000, falling nearly to $60,000 as of the start of October.
Here’s how it looked at the time.
Source: StockCharts.com
But since then, Bitcoin has popped roughly 10%, and yesterday, briefly breached $68,000 before pulling back.
Clearly, this is good news. However, we’ve been here before, and the gains haven’t held. So, we’ll repeat our same takeaway from October 1 Digest:
Even though we like seeing these gains, we’d feel better if Bitcoin slipped back to $64,000 and used it as a springboard for a fresh leg higher.
Doing so would mean the grandaddy crypto had turned former resistance into support.
Despite our “prove it” mindset, history suggests that a Bitcoin surge is coming
Bitcoin’s current multi-month price slump is unusual. But it’s also bullish.
Let’s go to Luke’s latest update from Crypto Investor Network to explain:
Bitcoin is currently working on its 8th consecutive month wherein it hasn’t moved more than 20%.
In the past seven months, Bitcoin’s monthly move has been less than 20%. It has not gone up more than 20% or down more than 20% in any month since February. If that trend continues this month, it’ll be the 8th month in a row with a monthly move less than 20%.
That is really unusual for Bitcoin.
In fact, Bitcoin has only once before registered 8 consecutive months of a monthly move less than 20%. That was in the late summer of 2015. From February to September 2015, BTC lounged around $250, consistently failing to breakout or breakdown for 8 straight months.
Then, the breakout happened. Bitcoin soared nearly 40% higher in October 2015. By the end of the following year, it had more than tripled.
Going forward, there are a few technical milestones to watch.
First, as we’ve already covered, we’d like to see a pullback to $64,000, where Bitcoin holds, bounces, then continues climbing.
Second, watch $68,000. This is Bitcoin’s double-top from July. As noted earlier, yesterday, Bitcoin briefly pushed north of $68,000 but was rejected.
Then, there’s $71,000 – another technical resistance level – followed by Bitcoin’s all-time high of $73,835.
So, we expect a “two steps forward, one step back” progression over the coming weeks. But the overall move should be “up.” We’ll bring you Luke’s most up-to-date analysis here in the Digest.
Finally, as you mull AI investments, don’t forget valuation
Regular Digest readers know that I’ve been repeatedly spotlighting today’s expensive market valuation. While we want to remain in this market to benefit from its bullish trend, it’s critical to maintain a healthy respect for how overpriced we are – and what that means for risk.
Our macro expert Eric is of a similar opinion. Let’s go to his October issue of Investment Report:
Valuation matters.
Stock valuations in the United States today are close to record highs, which means their wealth-building potential is close to record lows, all else being equal…
Today’s stock market environment does not exhibit the identical giddy excesses of the dot-com era, but it does feature similar valuation extremes…
To illustrate, Eric points toward the S&P’s price-to-earnings ratio today. Its level is so high that history suggests losses are likely over the next decade:
At 26.4 times earnings, today’s P/E ratio is not merely in the highest decile since 1953; it is in the highest half of the highest decile, which is especially foreboding.
When stocks have traded at that level, or higher, they have produced a 10-year gain only 27% of the time, which means they have produced a 10-year loss 73% of the time.
Now, this doesn’t mean Eric is getting out of the market. But he is avoiding the rabid “buy everything” bullishness that’s spreading today; instead, he’s becoming increasingly selective about new investments – ones with valuations to support long-term gains.
But it’s not just an attractive valuation that’s on Eric’s radar
He’s also looking for stocks that have two additional characteristics: 1) economic moats, and 2) businesses that AI cannot easily, or ever, replace.
From Eric’s July issue:
A short list of examples might include industries like…
· Shipping
· Cosmetics
· Lumber
· Energy Generation and Storage
· Travel
· Sporting Goods
· Rail Transit
· Agriculture
These industries might not be completely future-proof from the onslaught of AI, but they are at least close to it.
Yes, invest in AI. The hundreds of millions of dollars that Big Tech are pouring into nuclear power today are evidence that AI isn’t a fad. But balance your portfolio with stocks that will survive – even thrive – regardless of AI.
For more of Eric’s research as an Investment Report subscriber, click here to learn more.
Bottom line: Stay with this bull but be aware that not every bullishly acting stock is going to make you money in the long run based on today’s valuation.
Have a good evening,
Jeff Remsburg
