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Why I Bought Energy Fuels (EFR-T)

Published 08/08/2013, 12:54 AM
FTNMX551030
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Energy Fuels is a uranium mining company. It's a penny stock; I bought it at just under $0.20 per share. With these types of stocks, I don't think it makes sense to buy them unless one envisions potential for a huge move within a several year period. Personally, I'd like to see the price triple of this stock triple within 5 years, and I bought it under the belief that such a move is a reasonable expectation.

Below is a chart.
Interval
I'm very bullish on uranium; in the interests of brevity I won't go into the full argument for uranium here, but our uranium archive offers a number of detailed discussions and presentations.

Unlike most penny stocks, EFR is profitable and appeals to many value-oriented investors. It has a P/E ratio of under 4; this means the stock price is about 4X the annual profits of the company. Currently, the average P/E is around 18 (see the chart below), which suggests the stock is cheap relative to other profitable companies that are traded.
S&P 500
With penny stocks, I think it's important to have a deep understanding of the industry, management, and their strategy. Energy Fuels is positioned to be the dominant producer of uranium in the United States. Its recent acquisition of Strathmore Minerals gives it access to even more uranium mines in the US, which it can combine with its current operations to achieve economies of scale.

With penny stocks I'll usually look up key executives on YouTube, and watch company presentations there as well. If the management doesn't strike me as being sufficiently competent, that'll be a dealbreaker for me. While I prefer to go to conferences to meet management, YouTube does provide a discount substitute of sorts.

Here's one video -- more exist on YouTube.

Below you may find the video.

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