Peruse the Twitter accounts of popular retail investors, and you might just catch sight of a lesser known species of amateur stock-picker: the uranium bull. 

While that might sound like some kind of radioactive monster, it is in fact a small but devoted group of investors who see an opportunity in the metal commodity that makes nuclear power possible.  

These investors are not just banking on uranium reversing its nearly decade-long bear market, but also kicking off a "generational bull market," to quote a well-known account, that will mark a radical transformation in energy production. 

Even Michael Burry of The Big Short-fame is getting in on the action. 

In a post-GameStop, increasingly memefied stock market, it can be hard to tell what's noise and what's based on a serious investment strategy, but the case for greater investment in uranium has a more complicated backstory than the latest crop of buzzy stocks. It's also a story that overlaps with unsettled questions about nuclear energy itself, which are shaping how investors approach the space.  

'The Uranium Thesis'

The origins of the uranium bear market stretch back to the 2011 Fukushima disaster, which set off a wave of anti-nuclear sentiment across the globe and led to a cascade of plant closures in countries such as Japan, Germany, and Italy. 

As the primary commodity in the nuclear fuel cycle, uranium prices quickly followed suit, plummeting to historic lows by the middle of the decade. 

Rock-bottom prices persisted for so long that about three years ago a fledgling group of hedge fund investors saw an opportunity to take a contrarian view on the embattled energy source. 

"The core uranium thesis is there's not enough economic supply at today's prices, and you need the physical price of uranium to basically double in order to bring on new production," said Tim Rotolo, CEO of North Shore Indices and co-founder of Sachem Cove Partners, a uranium-focused investment business.  "My view was if we're right on that, a lot of new money will flow into this sector."

Put another way, prices are below production costs, which disincentivizes production, and production is necessary if even the most conservative estimates of the sector's growth came true. 

"In the West, it was a flattish to slightly declining industry, but in the East and in the developing world it was a booming industry," said Mike Alkin, chief investment officer at Sachem Cove and the driving force behind the strategy. "When you put it all together, looking at draconian assumptions on closures and being very conservative on new starts, we figured it was about a 1 percent grower."

That wasn't exactly "sexy growth," as Alkin put it, but it still meant that the price would eventually have to pick up just to get production rolling again to keep up with a baseline of demand. 

Because plants usually secure uranium through long-term contracts and often keep large inventories, this wouldn't happen all at once, but eventually demand would pick up, according to the hypothesis. 

"Part of our thesis is that nuclear is not only misunderstood by the public but also just underfollowed by investors," said Art Hyde, partner at Segra Capital Management, another originator of the uranium thesis. "The result of that is there just hasn't been that much capital invested in the fuel cycle which supports the industry." 

The theory started to bear out in 2020, in part due to the same COVID-19-related supply-side constraints that impacted the rest of the economy, but also because momentum was building around uranium itself. Purchases of uranium were slightly up last year, and its price has since reached $32 per pound, nearly double the 2016 low.  

Uranium bulls are holding onto this strategy amid an uncertain time for nuclear energy in the U.S. In Illinois, two of the state's six plants are in danger of closing if a highly contested energy bill does not pass with much-needed subsidies. In addition, earlier this year, the Indian Point nuclear plant in New York shut down after years of struggling to compete in an open energy market with cheap natural gas.

Notably, uranium investors have proven reactive before, dragging down prices after news  broke of a performance issue at the Taishan nuclear power plant in southeast China that later proved more minor than early headlines suggested. 

Hyde, who is admittedly taking a bigger-picture view of the nuclear industry, said a relative amount of uncertainty in the U.S. nuclear sector doesn't necessarily concern him. 

"It definitely impacts the thesis, but it's not about one or two plants being saved from our perspective," said Hyde on the situation in Illinois. "It's about the broader recognition that if we want to hit net-zero, we're not going to do it without nuclear."

The Case for Nuclear 

While many uranium bulls double as advocates for nuclear power, it's worth noting that their initial thesis had a limited scope: prices and value were mismatched, and the market was eventually going to course-correct. The goal was to get in on the ground floor of that trade.  

Yet much has changed since the strategy was first developed by the likes of Hyde and Alkin back in 2017-2018, not least of which was the passing of the Paris Climate agreement, which somewhat committed much of the world to reaching net-zero carbon emissions by 2050. In many ways, the international accords marked the moment that rubber met the road when it came to decarbonization. 

"A number of states, and more recently many large companies, have created these 2030, 2040, 2050 carbon targets," said Hyde. "If they're going to be held to those, decision-makers understand that the math is dramatically easier with nuclear. It really comes down to educating ratepayers and policymakers on how the grid works and how important the technology is to our way of life today."

This argument aligns closely with the narrative presented by a new generation of advocates who believe nuclear power should play a greater, if not leading role in the transition away from fossil fuels. It also butts up against the messaging of established environmental organizations that have long focused their advocacy around renewables such as solar and wind as the most promising alternative to fossil fuels. 

"As westerners, what we see is doom and gloom about the nuclear demand output," Alkin said. "But if you want to get to a carbon-neutral world from a greenhouse gas emissions standpoint, you cannot get there without nuclear power as a meaningful part of the mix, because wind and solar are intermittent."

Whatever the merits of the respective energy sources, from an investment standpoint, longer-term optimism about nuclear could lead investors to look beyond the uranium market for potential trades, though options for expressing this view are somewhat limited. 

"In the world of nuclear power, from a public investor standpoint there aren't a lot of ways to express the view," Alkin said. "If you're bullish about nuclear power, the way you would express the view right now, for the most part, is investing in the uranium mining space."

Hyde has argued that nuclear needs to be better incorporated into Environmental, Social, and Governance (ESG) standards, which could help broaden its appeal to investors. Others in the industry share this perspective, though the effort is still in its early stages, as nuclear continues to be left out of climate change financing initiatives such as the UK 's Green Financing Framework.

"From an ESG analysis perspective, nuclear power is a bit of an oddity, in that most analysts didn't build their rubric around the industry, and they don't really know where to put it," he said. 

As for the buzz about uranium on platforms such as Twitter and Reddit, Rotolo said it's increased visibility and made the story interesting to the media, but it also reflects a kind of tribalism that has swept through retail investing. 

"We take it all with a grain of salt, but it's great to see that there's a community of people who care very much about this thesis," he said.

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