Uranium: No mine* for long term investors.

First - Let’s address one thing right off the bat here. I fully understand that in every commodity bull market, the value of the equities, be they producers or service providers to that sector, ALWAYS overshoot their fair value, and not just one for one day either: they will almost always continue to do so while the sentiment in the market goes into a full irrational fever pitch.

But in a market where the value of your investments can go down 30% or more in between you getting up to get some coffee - I prefer to invest in things that are NOT overvalued.

Second point - In regards to a long position, I value equity and other investments on the actual business or the underlying asset itself, NOT what the market thinks about it. (Please Note: for a short position, what the market thinks becomes a factor). This could be the potential for growth, and what I project a reasonable expected return to investors will be over time.

In terms of establishing a margin of safety, while this is not the only factor, but one of the most important in my approach is determining if my returns were to ONLY come from my projected reasonable expected returns to investors, how satisfied would I be with just that. Put another way, I like to consider a capital gain achieved via investors bidding up the equity in the secondary market as the bonus to my total returns.

So the questions that I want to put forward to you -

1 - Does the current price of “xzy” uranium equity have a good margin of safety?

2 - If you currently have a large capital gain, are you better off continuing to hold that investment?

And with one exception - my conclusion as to the answers of those questions is no.

Here is why..