Andy Obermueller writes the Game-Changing Stocks newsletter for StreetAuthority, which is either new or renamed as far as I can tell (it looks like it might have replaced his Government-Driven Investing), and he’s been teasing us with a spiel about the hottest investment opportunities for next year — hoping to get on early, I guess, as the prognostications begin to pile in this Fall about the top picks for 2014.
The special report he’s peddling is called “The Hottest Investment Opportunities for 2014” and, as is typical for these kinds of “special reports” it’s “Free!” … though, it appears, that means “free if you try a subscription to his newsletter.”
And, also typical of the genre, he gives away the name and ticker of one or two names at the top of the ad to get our juices flowing — this time the free pick is SodaStream (SODA), which has been one of the better-performing stocks this year but has come down from the highs over the last month. He also pitches a penny stock that makes the sweeteners SodaStream needs, but doesn’t really provide any clues — he could be teasing one of the Stevia stocks, but those are pretty much all penny-stock-promotion junk. The sweetener SodaStream actually uses in their core syrups is Splenda, which is owned by giant companies and doesn’t move their needle much (that’s Tate & Lyle and Johnson & Johnson).
And he also pitches the “freely revealed” stock Nuance Communications (NUAN) as his play for the “death of the keyboard” as voice recognition continues to become a major trend in human-computer interaction — NUAN has been teased many times as well, of course, and it’s not one that’s ever been super-appealing to me, but they’re certainly the major player in voice recognition.
So let’s move on to some of the other stocks he teases — first is the enabler of the “Apple Bank” …
Well, I’m afraid I say “phooey” to the idea that Apple will be creating a NFC payment network that generates any meaningful returns for them next year — but it’s possible. I also think it’s unlikely that Apple will be buying a maker of mobile payment chips that use near field communications (NFC) — the technology that most people are looking for to continue to revolutionize the “pay by cell phone” trend. But again, possible.
“I predict that within the next 12 months, Apple will create a new currency called iCash and become the largest bank in America.
“The company is already quietly moving in this direction. It recently acquired biometrics security firm AuthenTec (Nasdaq: AUTH). Why? Because the single most important part of the mobile payments revolution is security. It wanted to have sole access to the best technology….
“I believe that it has the best shot of creating the “It” product when it comes to mobile payments.
“That’s not to say that Apple doesn’t face stiff competition.
“For instance, Wal-Mart, Target, 7-Eleven, Publix Supermarkets and a handful of other major retailers announced that they are working to develop their own mobile payments system, according to The Wall Street Journal.
“And other cell phone companies, like Google and Vodafone, are also vying for dominance in this space.
“Fortunately, there’s a simple way for you to profit from this sea change with or without Apple being the winner.
“It’s with a company that has a unique role in this game: It makes the various electronic components, including chips that make mobile payments possible. It has relationships with all of the major smartphone manufacturers, including Apple.
“It’s a $6 billion company, which would be nothing for Apple or Google to buy, considering their cash hoards.”
Apple has an extremely powerful mobile payments position because they have more credit cards on file than anyone else, even Amazon, thanks to the iTunes store, but that doesn’t necessarily translate well into becoming an NFC payments power and letting you make your purchase at McDonald’s or Starbucks by waving your phone at the counter.
Presuming that NFC does continue to develop and grow (as has been promised for over a decade now, so be careful what you expect as far as timing), which chip stock is Obermueller touting?
Well, at a $6 billion market cap the pickings are fairly slim — the best candidates I’m aware of who have been near $6 billion in recent months are probably Infineon Technologies (IFNNY), NXP Semiconductors (NXPI), or STMicroelectronics (STM). ALL of which had market caps of about $6 billion back in April and May before they moved up, almost in unison, to 25-30% or so gains from there, so that could fit if he was putting his research together several weeks ago. They’re all very well-established with ties to most of the important companies in mobile, they all have significant NFC chip businesses.
If I were to pick one of them as being most levered and best-positioned for NFC without being overly reliant on one customer it would probably be NXPI, but I’m not an expert on that sector and I don’t own or follow any of these closely. Much larger players like Broadcom (BCOM) and Qualcomm (QCOM) are also in the NFC space so there’s certainly no one winner you can pin a flag on and guarantee you’ll profit as (or if) mobile NFC payments become more important.
And interestingly, Andy Obermueller also touts uranium as one of the big “surprise” stories of the next year — something we’ve heard before. And while it hasn’t been a teaser topic much of late, I have seen many other pundits quietly indicating their interest in uranium miners this year … really, one of the few mining sectors that’s getting some positive mention of late.
The reason for that is the end of the uranium recycling deal with Russia — the possible end of the supply that the world’s electricity generators have enjoyed as warheads were turned into fuel for power plants. That treaty ends at the end of this year, so it’s always possible that there will be similar disarmament deals made (though unlikely, I’d think), or that new technologies and more recycling of spent fuel will cut demand for uranium below what is expected … but most people believe the price is likely to increase by at least a bit as the supply dwindles and demand continues to climb with new reactors built, particularly in Asia.
So what does Obermueller say?
“Your best bet to profit is with the only uranium miner in the world that has a chance of ramping up production fast enough to satisfy the coming wave of demand. This single firm produced almost 20% of the world’s uranium mined last year. What’s more, it’s sitting on 65% of the world’s known uranium supply.
“It owns a high-grade mother lode that boasts the richest uranium ore body on the planet — with concentrations 100 times stronger than average.
“The site is so fertile that the ore has to be blended with waste rock just to make it safe to handle. That ultra-high ore grade is a major advantage. Extraction costs are so low they could turn a profit even if prices drop in half.
“Uranium now costs around $40 to $50 per pound. If it jumps by $30 a pound, which could happen fast once the Russian supply dries up, it could add hundreds of millions of dollars to this company’s bottom line. This stock would almost have to soar.”
Well, as you might expect this would really have to be Cameco (CCJ), the standard-bearer for large public uranium stocks — they have two of the largest and highest-grade uranium mines in the world in McArthur River and the soon to be fully operational Cigar Lake, and they’re profitable. This is a big company, with an $8 billion market cap, but it pretty much is the tradeable uranium market — there are smaller uranium companies like Denison (DNN) or Uranium One (UUU.TO or SXRZF) or Paladin Energy (PDN.TO), and active uranium operations at several other large miners like Rio Tinto (RIO), but they all pale in comparison to Cameco when it comes to size and the capacity to mill and produce uranium — and to produce an increasing amount of it, if needed.
For many years CCJ has been the investable way to get uranium exposure — the way that Newmont was the way to get copper exposure in the days before ETFs and futures made commodity exposure simple (there are ETFs for uranium producers, most of which have at least a 20% weighting in Cameco shares, but no real futures market — most uranium is sold on long-term contracts and is, as you would imagine, highly regulated, though the contracts often do adjust for pricing of the “spot” market). You can always check out those more diversified ETFs, particularly if you’re still feeling skittish about Cameco because of their past troubles in getting the Cigar Lake mine built (flooding, etc.) you could always go with another strong producer like Uranium One or with one of the ETFs — probably the most direct play on uranium miners in ETF form is the Global X Uranium ETF (URA).
If you don’t remember the Cigar Lake troubles, the mine actually started construction eight years ago — they had a catastrophic water inflow that shut them down for a long time, then more water troubles, and they only last month got permitted to start production, which is probably happening right now. CCJ has substantially outperformed the Uranium index over the last year or so, which is understandable given that it’s the big, established and profitable player — little explorers have no hope of love from investors in this environment.
Cameco’s mines are very long-lived, very high grade, in Canada and the US for the most part, and probably at least as safe as any other uranium stock — though that may not mean much given the very volatile nature of uranium prices over the past ten years. Of course, it’s also not cheap and it may not double as fast as some of the jumpy little stocks if we do see a spiking uranium market next year as many folks expect … but if you’re looking for uranium than Cameco should be the obvious first stop for your research.
And if you’re curious about the general state of the uranium market, there’s a very good and (it seems to me) pretty balanced look here from the World Nuclear Association about the current state of uranium production and demand, and about the future demand/supply curve — it also indicates that we’re probably going to see pricing improve with demand and sluggish supply, but it’s not a guarantee given the large number of old reactors, the substantial mining capacity that is coming online, and the potential for more recycling, better re-refining of spent fuel, or more warhead dismantling.
And that’s all we’ve got time for today — if any of Obermueller’s other “best ideas for 2014″ look interesting as I dig through I’ll share those answers with you in a future note. If you’ve got a fave of the picks above, or your own top stock for 2014 to suggest, feel free to shout it out with a comment below. Thanks!