With two weeks away from everyday chores and work I have had some time to think and look at the big picture. That has led me to consider my initial investment plan. Should I stick to it, or should I change it in light of the developments we have seen in the uranium sector?
I am not that original. I think I have seen this song referenced in other articles about investing:
«You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run»Kenny Rogers – The Gambler
This applies both to when you are winning and when you are losing.
I am trying to stick to my plan and start scaling out of my positions around certain targets that I set in advance in 2019. (You can see posts and videos from Ferg and Smithweekly for inspiration on how to scale out of your positions). That is hard to do when you see the case you invested in just continues to get better and better. (In a bull market, all of a sudden, everything seems a lot better than you imagined. This is also the time you have to be extra careful). You hear about people who rode the market all the way up and down the last time. Most do not want to end up doing that.
Talking about scaling out is not me bailing on the sector. So far I have done very well by not listening to other peoples advice of “taking my initial investment off at a double”. If I had followed that advice I would have limited my upside by a lot. My initial plan has been to sell down at certain spot price levels. (I hoped that the portfolio would be at 10x the value of my initial position in 2019 by that time. — At the moment it seems to be within the realm of possibility). I will still have a massive allocation to the sector if I sell down 1/10 of my allocation (as an example). Anything can happen anytime with investments, and the blue sky potential can turn on you very quickly.
Still I am a greedy bastard…
I have thought about the bold people that history remembers, the Rockefellers and the Carnegies, and what they would have done. (I just need to remember that there are many that lost most of their fortune doing similar things). If you diversify too early you will have nice returns, but they will not be life changing. I am still aiming for life changing.
The base case for uranium has always been the supply and demand imbalance. We have new production waiting for higher prices, inventories running low, and growth in nuclear from the East. The developments we have seen the last couple of months have not been part of my thesis. I invested in a sector priced for liquidation from 2019 and early 2020. I had the base case that we would go from the sector being absolutely horrible to being OK. We are in a very different place right now.
SPUT, Yellow Cake and ANU Energy (with help from Kazatomprom) stacking uranium. Uranium developers (Denison, UEC and Boss among others) and producers (Cameco and Kazatomprom) buying uranium from the spot market. Nuclear looks to get into the green taxonomy with renewables. Japanese restarts seem a lot closer to happening. (One certain guru wanted to see this before he would give a green light on the bull market in uranium). UK and France leading the way for nuclear renaissance in Europe. The US turned from closing down plants to fighting for extensions of them and a lot more I have forgotten to mention.
To help me with sticking to my plan, I have done one adjustment. I just increased my investment to the sector by about 5% in September. (The 5% increase is about half my yearly salary, so it is a substantial amount). When I do my first scale down it will be from this «extra» investment from the September amount, and not the longer term investments that have been through the ups and downs the last couple of years. I managed to invest 5% extra into the sector by postponing renovation of me and my wife’s apartment. History will prove if I am right about this call or not.
The later you start investing (or invest in a sector), the bigger the amount you need to invest to keep up with a person who has been there longer. (At least if they have several 100% in return already). My biggest edge is that I have invested hard the last 10 years, and that I have been in uranium since early 2019. They often say something like «The best thing is to have started 10 years ago, the second best is today». I felt like late to the party in early 2019, and I am grateful for all the extra time I have had to invest in the sector.