Value Microcaps Free-For-All

[micham2012]

Len:

I am in way over my head here, but will share one other thought about the action in uranium stocks in the recent past.

For a couple of years, I have had a substantial position in a natural resources mutual fund, GHAAX. It owns what you would expect to it to own: large cap energy and industrial metal stocks, with a small exposure to the precious metals. I have always seen it as a kind of proxy for the natural resources area as a whole. While there is no uranium mutual fund, I have always seen CCJ as a comparable kind of proxy for uranium stocks, and my guess is that it has declined in the recent past to about the same extent as your group of stocks. For the heck of it, I decided to compare the two during the past 3 months:

http://finance.yahoo.com/q/bc?s=CCJ&t=3m&l=off&z=m&q=l&c=ghaax

To me this suggests that the recent selloff in uranium stocks may be as much related to a general selloff in the natural resources area as it is to any perception that uranium is particularly frothy. Indeed, one could interpret the chart as suggesting that uranium has held up a little bit better. Of course, if you go back a year, CCJ has way outperformed the resources mutual fund, which may mean that it has further to correct.

Again, I have no wish to defend the valuations of many of the Canadian juniors.

If the spot price for uranium moves up again this week, it will be interesting to see how the stocks react. I was surprised last week to say the least. And if natural resources stocks generally have found some kind of bottom, it may be that uranium has as well.

Steve