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Cameco (CCO)

68K views 203 replies 47 participants last post by  james4beach 
#1 ·
The slaughter just seems to continue with uranium producers. Cameco is now at 19 and sporting a pedestrian PE of 17 with a dividend yield around 2%. It is almost looking like a value play now despite an earlier run at 45.

It is now actually close to its 2009 low.

I know some are really down on Uranium but Japan has only talked about moving away from Uranium - I don't know if they'll be able to do it. Germany has long-range plans about not pursuing more nuclear power plants but again it remains to be seen what they'll do. Meanwhile we know that India and China are continuing to build more plants. We also know that current uranium production is insufficient for existing uranium use with the gap filled from decommissioned nuclear arms warheads. However, those warheads are now also running out.

I think this is a good opportunity for a long-term contrarian bet but I would wait for a more solid bottom to form as these guys just continue to sink. Cameco is the strongest player in the field and they have the hedging programs in place to ride out any weakness in uranium spot prices. They also seem to be intent on trying to expand with the hostile takeover of Hathor. I also wonder if they make a play on Denison Mines with their stocks down about 75% from their yearly high and trading at 1.19 now.

I guess I'm ready to jump in once the knife stops falling. Are any of you guys about ready to wade in?
 
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#5 ·
I still own Cameco. I have an ACB in the low $20 range. Perhaps I should have waited but I am content to pick up an accidental dividend nearing 2% while I wait. (Just as good as keeping it in a HIS).

I can see this sector hurting for some time but I see it as a "there's a little problem we didn't anticipate" turnaround value play as Peter Lynch would put it. It will rebound it's just a question of when. Nuclear power is here to stay. Even Germany's plan to decommission is so far into the future it's irrelevant. Besides Germany has bigger things to worry about atm.

I recently saw a commercial on BNN by UAX. I found it amusing that they were trying to find shareholders by using a takeover target campaign. There were many comparisons made to Hathor in the ad. Perhaps they feel it is an opportune time now that Cameco has withdrawn from the Hathor acquisition. Drilling results are supposed to be released from UAX in a couple of weeks if I recall.
 
#6 ·
Did China and Indian finished their safety reviews amid Japan accident yet?
I beileve they did, but the industry is not reacting.

We have the science backing us. Anti nuclear groups have oil and gas companies backing them up. I wonder who will win lol. If you look at the funding source of anti nuclear groups, you will notice that they can be traced directly back to oil and gas companies.
Nuclear energy competes directly with fossil fuels, not with renewables. Renewables at their current stage is simply too expensive to compete against nuclear and fossil fuels.

Aside from Greenpace (they are against everything that promotes economic growth) also against nuclear power; however they are busy with drilling, fracking, building, everything lol.
Who provides funding for Greenpace anyways lol since they are against everything.
 
#9 ·
I played the contrarian bet shortly after the Fukushima disaster so I'm in around $26. I haven't averaged down yet as I didn't want to be overweight in this industry. I'm a little more balanced now and if I free up some cash I'll probably buy a bunch more.

As mentioned above, China has a bunch of new reactors currently being built, and there's currently not enough uranium being produced to supply all the new reactors that are planned to come online in the near future.
 
#12 ·
IMO, instead of continuing to average down & locking new capital in this constant volatility, you should have traded, saved the profits and then bought at every dip, at least that way you would have been buying with profit.

I have a good ACB on my long-term position and continue to add with profits. ;)

What's not to like in CCO?

Btw, were you copying my portfolio? Because I too have many shares of MFC :p :rolleyes: [but I trade them as well].
 
#18 ·
i'm thinking this might be somewhat nice in cameco & will be getting nicer if stock falls. Buy ccj jan 2014 10 calls, bid 9.60 ask 10.40. One would aim to purchase for 10.15, maybe 10.20.

then sell ccj jun 23, bid 1.10 ask 1.20. One might aim at 1.15 but if one had been lucky on the buy one would be content to collect 1.10.

cost of this lovely spread might be 9.05. Its upside is 13.00 before 2014. That's good enough.

if you bought a stock that appreciated 40% in 2 years 2 months you'd be happy too, right.

ps that june 23 strike price is a bit on the high side because i've already taken all the capital gains for 2011 that i can tolerate, so i'm trying to keep the gains down.

long before june those jun 23s will get rolled over, maybe to something lower & more aggressive, with a higher premium to be collected. Bref this strategy is like a covered write on steroids. Except that the long leg is not the stock, it's a 2014 LEAPs call option. It all costs roughly half as much as purchasing cameco stock.

don't even think of mentioning the missing dividend. It's a 2% dividend yield compared to 10% capital gains yield. Of course, the gains yield has more risk ... so what were you expecting, a freebie christmas present ?
 
#19 ·
Humble Pie is a pr option trader I see.

I thought about buying a long term Call option at these levels. Since I will be going long, I want to get in earlier because I need time to save up money to possess the actual shares. However, after running some numbers, I believe that using margin and line of credit prove to be better due to the following:
1) won't miss out on that dividend
2) the interest rate equivalent of that call option is around 10%+ even if i used cash

margin interest rate is only 4.25%, and line of credit is only 4.5%. I ruled out using options all together.

I have been to find a way to use options to fit my strategy of buy and hold, or anything that is in my favor; however, the option market just failed miserably for my taste.
 
#25 ·
I call it buy and hope. Lots of folks believe it's the best way to do it, and for some that are not inclined to learn and spend the time to do it themselves maybe it is. Personally I wish to protect myself from the possibility of large losses and options let me do that.

That doesn't mean I don't hold anything over a year - just that I use options to protect my investments against large losses and to generate additional yield where I can.
 
#26 ·
If you were to buy and hold, why do you needs the options?.
Dont options protect you from downside risks and cap you from up side gains?
Isnt the same as lighten up on your positions. It has the same effect. Once you've decrease your holdings, your down side and up side get decreased.
 
#27 ·
Humble may well chip in and clarify but Options go far beyond just protecting from Downside and Cap from up side.
Once you understand them, (not that I claim any expertise, very beginning for me understanding these also) you could "rent" (covered call) your stock out and collect a premium that would increase your annual return, can make the difference between making a 5-6% return or making a 30-40% return over a few years. Very attractive on stocks that are stable and already pay a healthy dividend.
I also would like to thank Humble for the detailed layout for CCJ:)

Humble, just so I understand the end game with the CCJ spread. If stock goes up to $22.00 then we get exercised and use the Leap Call to fill: Make approx 40%

If stock keeps going down, then is when we would try to sell another C say at 18 if CCj at 16$? Would we have to buy the 23Call to close it out before?
 
#29 · (Edited)
betzy example was a june 23, even if stk went to 25 we wouldn't necessarily be early exercised on the june 23, there would be ample opportunities to buy it back before expiration & sell another farther out in time (by the time this exercise is being played out the sep 2012, possibly the dec 2012 & certainly the jan 2013 options will be candidates.)

or, in a soaring advancing market, one could choose to both exercise & be exercised, as you have correctly analyzed, for a nifty short-term profit.

in general, a diagonal call strategy like the ccj example means working the ongoing sale of short-term calls the same way that we work em in covered writes, when we hold the stock itself. However, the cover or the long leg is a LEAPs option instead of the stock.

in the example, one would have from now until 3rd friday in jan 2014 to keep on selling calls, all with strike prices above 10.

you have raised an example of next selling an 18 call if, say, stk would have dropped to 16 (i'd always advocate for the buying-back-to-close of the june 23, of course.) Yes, one could certainly do as you suggest & sell the 18, but keep in mind that now the potential gain drops from 13 (23-10) to 8 (18-10.)

are we ok so far.

the thing i like about the ccj diagonal - and there are many others like it - is the ultra-low strike price of the long LEAP. There's very little tv - theoretical or time value - in the premium. It's almost all intrinsic value. By paying close to intrinsic value, one is leasing-to-buy the stock, stripped of its dividends, at less than half price.

i myself buy extreme deep-in-the-money LEAPs for diagonal spreads, although i believe many others will buy leaps with higher strikes because they are cheaper.

what i like about the extreme ditm prices is that, for the life of the leaps option, there is always something to sell, even if the market falls into the garbage pit.

suppose cbj were to fall to 12 in crashed markets but one had unfortunately bought a 2014 $18 leap. There would be no premium worth selling in the short-term 20 or 22 calls. There could be some premium worth selling in the short-term 14s or 15s, but one would be opening an uncovered risk window in that one would be potentially short at 14 but only covered at 18.

but with that $10 leaps call as bedrock, even in a disaster i've still got some lavender to sell, like poor liza in covent garden.
 
#33 ·
betzy

in general, a diagonal call strategy like the ccj example means working the ongoing sale of short-term calls the same way that we work em in covered writes, when we hold the stock itself. However, the cover or the long leg is a LEAPs option instead of the stock.

in the example, one would have from now until 3rd friday in jan 2014 to keep on selling calls, all with strike prices above 10.
Ok Humble I have another one for ya.
Looking at this still with "I have no idea what the term for this strategy is" but here it goes:

Buy C 18Jan 14 13.00 strike price-$8.70 as of Friday close
Sell C 18Jan14 25.00 strike price-$2.95 also friday close

Cost of Call spread $5.75(not including commissions) if calls get exercised between now and then Gain would be $12.00-$5.75(CSC)=$6.25 (108.70%)

Could one and would the broker allow one to sell short calls closer to the ITM price but still not near the leap strike price all the way until Jan 2014?
As long as we own the leap call its non issue since it covers the short term calls. If they did get exercised we could use the leap to cover and then buy another leap to cover the still existing leap call sold.
Again, I am learning so does this make any sense?? Is there a name for this?
Along this topic, what are the chances a leap call could get exercised before the expiration date? I know a month or two out if deep in the money is strong possibility but could it get exercised a year out?
thanks for sharing
 
#34 ·
good questions betzy. I'll try to answer the simple parts here, maybe get around to the rest later, ok.

Buy C 18Jan 14 13.00 strike price-$8.70 as of Friday close
Sell C 18Jan14 25.00 strike price-$2.95 also friday close

Cost of Call spread $5.75(not including commissions) if calls get exercised between now and then Gain would be $12.00-$5.75(CSC)=$6.25 (108.70%)


this one is a vertical spread (dates are the same, strikes differ.) As you know, they can be built on any expiration date.

i guess everyone arrives to something they're comfortable with. I wouldn't, myself, do verticals because one's money is tied up until expiration *unless* stock soars in the interim (in this example, would have to soar above 25), in which case trader might as well close out.

now if trader were to buy the 2014s & sell the 2013s same strike price, that would be a calendar spread, as you know.

what you describe next is a diagonal, which is a cross between a vertical & a calendar.

Could one and would the broker allow one to sell short calls closer to the ITM price but still not near the leap strike price all the way until Jan 2014?
As long as we own the leap call its non issue since it covers the short term calls. If they did get exercised we could use the leap to cover and then buy another leap to cover the still existing leap call sold.


however, notice that we "could use the leap to cover" as you say, but you should then Full Stop your sentence. There would be no need to buy any other leap. Because both sides of the spread would be closed out, ie gone, game over. (the short call would be assigned to us; we would utilize the long call to acquire the stock at much lower strike price; we would then sell & deliver stock to assignor at the higher strike price.)

i've done dozens, maybe 80 of these diagonal spreads, since 2006-07 & i've never been assigned. Assignment is a complicated subject which i'll come to another time, there's already been some talk about this. Bref it's usually possible to know whether one is exposed to early assignment and, if so, exactly when.

just one reason why we don't want to be assigned is because most brokers have much higher commissions (all except IB, which i believe carries out assignments for free.)

hope we're still on the same page ... more later ...
 
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