Cameco (NYSE: CCJ) estimates that demand for nuclear power is growing so rapidly that uranium supply will be outstripped in the 2030s. According to the company, 72 new reactors are under construction, while older reactors are being restarted or having their lifespans extended. The nuclear boom is real as the world leans into a clean baseload power source.
Cameco and fellow industry service provider Brookfield Renewable (NYSE: BEP) are good choices for more conservative investors looking to get into the nuclear power sector. More aggressive types may prefer NuScale (NYSE: SMR) or Oklo (NYSE: OKLO). Here’s why.
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High risk high reward nuclear investments
NuScale Power and Oklo are both attempting to create businesses around small modular reactors. At this point, each company has a design, but neither has built a reactor connected to the electrical grid. They are each losing money and will likely continue to do so for a while longer. However, small modular nuclear reactors are a potentially important technological advance. If the technology takes off, NuScale and Oklo could have a long runway for growth ahead.
The problem, of course, is the risk that the technology doesn’t gain traction. And even if it does, it’s unclear whether both companies will be long-term survivors. Even aggressive investors should tread with caution and, perhaps, consider buying a little of each to hedge their bets.
Picks and shovels plays keyed into nuclear power
Cameco, highlighted above, produces nuclear fuel. The supply and-demand dynamic it expects to unfold would lead to rising uranium prices. And that, in turn, would be very good for Cameco’s profits. It already has a long and successful history in the industry and is a reliable fuel supplier to nuclear power plants worldwide. While it is a good way to get exposure to a picks-and-shovels nuclear play, the stock is already on the rise, up over 300% in the last three years. Some investors may prefer another option.
Cameco also owns 50% of Westinghouse, with Brookfield Renewable owning the other 50%. Westinghouse designs reactors and helps to build and service them. It generates more consistent revenues than selling fuel, helping to smooth out Cameco’s financial results. For Brookfield Renewable, Westinghouse simply supplements the cash flow generated by its global portfolio of clean energy assets. That cash flow backs a lofty 4.5% yield.
