When stocks are heavily shorted, investors can gain critical insights into what the professionals are thinking. A quick glance at the 12-month performance of Ashtead Technology (not to be confused with Ashtead Group) suggests a good reason to be pessimistic. But for J Sainsbury and Yellow Cake, these UK shares are seemingly proving to be more resilient, at least for now.

So, why are the experts betting against these businesses? And should investors be avoiding them like the plague?

What’s going on?

Each business operates in different industries and is facing its own unique challenges.

• Ashtead Technology has encountered numerous operational and geopolitical pressures that have culminated in a profit warning. And it seems hedge funds think the worst is far from over.
• J Sainsbury had been losing market share to Tesco and discount retailers but has been gaining it more recently. However, that situation could reverse should a full-blown pricing war erupt as inflationary pressures squeeze consumer spending.
• Yellow Cake is feeling the pinch of falling uranium prices, with concerns that rising operational costs may force management to sell some of its commodity reserves at weaker prices.

Given that these headwinds are proving to be quite persistent, it seems short sellers don’t believe the problems surrounding these businesses will be resolved quickly. And if that hunch is correct, then shareholders could be in for a rough ride.

Short sellers aren’t always right

Yet while hedge funds have access to expensive market research and data, not every bet they make is a success.

Sometimes, a large short position can present a lucrative opportunity for long-term investors. Why? Because if sentiment suddenly turns positive, the unwinding of a major short position can send a stock flying upward. And looking at these three stocks, there are some potential catalysts for a mood change.

Ashtead Technology still has a substantial order backlog, providing good revenue visibility. Management is already implementing efficiency initiatives to bring down costs in the short term. And if geopolitical tensions ease, market conditions could quickly and significantly recover.

Sainsbury’s latest trading update has also shown better-than-expected resilience, with like-for-like sales growth reaching 4.7% thanks to its Nectar loyalty programme. As for Yellow Cake, the rising level of investment into nuclear energy technology is expected to boost uranium prices significantly if global supply fails to keep up with demand.

The bottom line

Despite the weak sentiment from institutional investors, there are still some promising signs of potential with these businesses. And while I think it’s still too soon to determine whether these stocks can deliver a surprise comeback, I’m not writing off any of them just yet. That’s why investors may want to consider keeping a close eye on these UK shares as they continue navigating through short-term choppy waters.

The post Hedge funds are betting big against these struggling UK shares appeared first on The Motley Fool UK.

This could indicate concerns. But in this instance, I think it reflects the nature of the company’s activities. It buys uranium and then seeks to hold it for the long term.

At 30 September 2024, the group owned nearly 10,000 tonnes. Most of this has been acquired via an agreement with Kazatomprom, Kazakhstan’s national atomic company.

Although Yellow Cake’s not concerned about the spot price of uranium, day-to-day fluctuations do influence the company’s market-cap. This is evidenced by its five-year share price performance, which has followed a similar pattern to the uranium price.  

And I think this explains its popularity with short-sellers. In effect, they are using the company to speculate on short-term price movements in the uranium market.

A quick overview

Currently, it costs around $16m a year to run the company. Most of this is accounted for by storage costs. At 30 September 2024, the group had $26m in the bank. Assuming it doesn’t want to raise more money, it’ll soon have to sell some of its inventory to cover its operating costs. But with over $1.7bn of uranium on its balance sheet, there’s plenty of headroom.

The company has a very simple business model. It’s not exposed to the considerable risks associated with mining uranium. As long as its principal asset is stored securely and adequately insured, there should be little that disrupts its business.

However, there are only three regulated uranium storage facilities in OECD countries, so the company could be at the mercy of price gouging.

Also, Kazatomprom transports some of its product through Russia and has business relationships with the country’s state-owned nuclear authority. If it were to be sanctioned, this could affect Yellow Cake’s ability to buy additional supplies.

Impressively though, the group has no debt.

Taking a long-term view

On balance, I think the investment case is a relatively simple one. If uranium prices rise over the longer term, then the group’s share price should follow. Otherwise, there could be trouble ahead. Therefore, in my opinion, whether to invest or not boils down to an individual’s assessment of the uranium market.

Here, its directors are bullish. Although acknowledging that mid-term prices have dropped nearly 40% since their 2024 peak, they claim the long-term price has remained stable. And despite recent market turbulence, they say “uranium stands out as an example of resilience amid uncertainty”.

Future demand’s expected to come from additional nuclear power generation. In particular, from small modular reactors. The International Energy Agency reckons these could have 40GW of capacity by 2050. Under a ‘high-growth’ scenario, this might be 120GW. Either way, it’s likely to push uranium prices higher.

But I don’t want to invest in Yellow Cake. Although I think the fundamentals of the uranium market are strong and support the group’s long-term strategy, I’m too old to wait two decades (or more) before seeing a return. It might start to offload its uranium earlier but the timing will be dictated by unpredictable market conditions that are beyond its control.

However, younger investors could consider taking a stake.

The post This is the most shorted FTSE stock! appeared first on The Motley Fool UK.

With these concerns rumbling on, here are two alternative AI stocks I think investors should consider investigating.

Tritax Big Box

The AI revolution will require a huge ramp up in the number of data centres operating worldwide. Analysts at McKinsey & Company believe the global data centre market will grow 19%-22% between 2023 and 2030.

This is where warehouse operators like Tritax Big Box REIT (LSE:BBOX) come in. These businesses have the space to house all the hardware that make data centres tick. They are also benefitting from the e-commerce boom and post-pandemic supply chain changes.

Tritax itself last month entered the AI market by acquiring a 74-acre site in London. It plans to build “one of the largest data centres in the UK” on the land, with the potential to deliver 147 megawatts of power.

On top of this, the firm said that it had “created a further pipeline of potential data centre opportunities in key locations within the UK“.

During the last five years, this real estate investment trust (REIT) has provided an average annual return of 6.7%. I expect this to improve over the rest of the decade as interest rates fall and earnings rise. This will boost dividend growth along with the share price.

Remember, though, that Tritax shares could underperform if interest rates remain at or around current levels.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Yellow Cake

DeepSeek’s ultra-efficient model has raised questions over whether the AI revolution will supercharge energy demand as was previously expected. This could have serious implications for companies involved in power generation like Yellow Cake (LSE:YCA), a major supplier of uranium.

Yet as things stand, power demand is still expected to soar from current levels. International Data Corporation (IDC) analysts, for instance, has tipped data centre energy consumption to more than double from 2023 to 2028.

Uranium businesses such as Yellow Cake — which has large physical holdings of uranium oxide concentrate — will likely play a vital role in powering the AI revolution. With the world switching down on oil and gas consumption, the nuclear and renewable energy sectors will have to grow rapidly to match current and future power demand.

I like Yellow Cake because — like Tritax Big Box — it could help me play the AI theme in a lower-risk way than, say, investing in semiconductor manufacturers or software developers.

In this case, even if DeepSeek sets a new standard in power consumption, or the AI sector fails to grow as rapidly as expected, global energy demand should still soar over the long term as the world’s population expands.

Since February 2020, Yellow Cake shares have provided an average annual return of 20%.

The post 2 alternative AI stocks for savvy investors to consider in March! appeared first on The Motley Fool UK.

A nuclear energy revolution

Before I highlight the stock, it’s worth touching on the nuclear energy industry and how uranium is going to play a role in it.

The nuclear energy market is booming today because Big Tech companies are looking for new (clean) ways to power their data centres.

Microsoft, for example, just teamed up with Constellation Energy to help restart the Three Mile Island nuclear reactor in Pennsylvania.

Amazon meanwhile, just signed three deals to support the development of small modular reactors (SMRs) – nuclear reactors that are significantly smaller than traditional nuclear power plants.

Now, the interest in nuclear energy has implications for uranium because it’s used to create this form of energy.

In a nuclear reactor, uranium atoms are bombarded by smaller neutron particles and this releases heat energy, which is used to heat water and create steam. This steam then spins a turbine, which creates electricity.

So, uranium could be in high demand in the years ahead if the nuclear energy market keeps growing.

It’s worth noting that supply could also be very tight. Recently Russia – a major producer of uranium – threatened to limit exports in retaliation for Western sanctions.

A UK uranium stock

That brings me to the stock in focus today, which is Yellow Cake (LSE: YCA). It’s a £1.1bn market cap AIM-listed company that provides investors with direct exposure to the uranium market through a physical holding of uranium oxide concentrate (U3O8).

As of 30 June 2024, the company owned 21.7m pounds of uranium oxide concentrate. That’s equivalent to roughly 15% of 2023 of global uranium production.

This company has an interesting business model. Unlike uranium producers, it doesn’t face the huge risks that come with exploring for uranium and building and operating a mine. At the same time, it can benefit from any increases in the price of the commodity as it owns a truck load of the stuff.

So, it could be worth considering as a play on the commodity. If uranium’s prices rise in the years ahead, this stock could do well.

Of course, the risk here is that uranium prices drop. This would result in the company being worth less and its share price falling.

This risk shouldn’t be ignored. Uranium is a very volatile commodity and its price can swing around wildly at times as the 25-year chart below shows.

Overall though, I think the stock looks interesting. If I was looking for exposure to the uranium or nuclear energy markets, I might have a nibble here.

The post Could this UK uranium stock soar in the nuclear energy boom? appeared first on The Motley Fool UK.

One, a highly profitable business.

Two, a a brilliant track record in creating value for shareholders.

Three, a large future market for growth.

Naturally, my research threw up the most profitable UK stock on the market today. It has net profit margins this year of more than 98%. How is this possible?

Power metal

This is Yellow Cake (LSE:YCA). Does the name of the company sound familiar? You may have been paying attention in school chemistry lessons.

The business is set up to buy and hold yellowcake uranium. That’s a compound used in the preparation of uranium to power nuclear reactors. By holding Yellow Cake shares, investors get exposure to the price of uranium.

Has this strategy it been profitable over time? Yes, and then some. Yellow Cake posted its first full year of profit in 2019, raking in $29.7m.

Chief executive Andre Liebenberg said at the time that uranium markets were “structurally mispriced”. Prices would “continue to rise in the long term”, he suggested.

In 2020, the company arranged a deal to buy 1.35 million pounds of uranium as part of a 10-year deal with Kazatomprom in Canada. It paid $48.90 per pound. 

With the market price of yellowcake now sitting around $70, that’s a tidy return on investment. So there’s the shareholder value. Most notably, Yellow Cake has an extremely high return on equity. At 43%, it’s around triple the average UK stock.

How big can it be?

Yellow Cake only trades this commodity, rather than acting as a mining explorer or refiner so its overheads are low. Hence the large profit margins.

So what of the addressable market?

Uranium prices were heavily suppressed in the early 2010s, especially in the wake of the Fukushima disaster. That nuclear disaster saw 50 Japanese reactors taken offline. But more recently, prices for the industrial fuel have been soaring.

Right now, China is making a huge drive to snap up uranium supplies. That, amid a global rush to secure nuclear fuel, has pushed prices up to a 15-year high.

Governments worldwide are constantly seeking low-carbon energy generation to meet net-zero targets.

And nuclear fuel is still the most efficient type. A single pound of uranium can produce as much energy as 3m pounds of coal.

In tandem the Yellow Cake share price has rallied 54% in 2023. The company suggests its net asset value — that is, the value of all of the uranium it holds — is $1.8bn (£1.43bn).

With a market cap of £1.3bn, that means Yellow Cake is currently valued £130m less than all the saleable assets it holds. I’d say that makes for an intriguing value prospect.

Most profitable

A uranium investment vehicle is an adventurous play for any investor. Risks include falling demand for nuclear fuel, which would crush Yellow Cake’s value. Another damaging nuclear disaster could persuade governments to search elsewhere for low-carbon fuels.

For the moment, Yellow Cake holds just over 20m pounds of yellowcake uranium. That’s equivalent to 20% of global supply. To me, that makes this business structurally important.

And with the long-term scale back of fossil fuels, I’d say nuclear power isn’t going anywhere.

The post 98% profit margin? Yellow Cake is the most profitable UK stock today appeared first on The Motley Fool UK.

Let’s find out why these five Fools parted ways with some of their investments.

Concurrent Technologies

What it does: Concurrent produces computer boards and other embedded systems for use in critical applications such as military equipment.

By Roland Head. I bought shares in Concurrent Technologies (LSE: CNC) for my ISA in 2021 and 2022. I expected to hold them for years, but I sold my entire holding a few weeks ago.

Why? Although the company appears to be trading well, I think the story has changed since I invested.

When I bought the shares, Concurrent had a committed dividend policy and a cautious approach to growth.

Admittedly, the company was probably a bit sleepy. But I felt that newly arrived chief executive Miles Adcock was likely to fix these problems and improve performance.

What’s actually happened is that Dr Adcock has taken a more aggressive approach to growth than I expected.  The dividend has been cut drastically to free up cash, and the company is expanding through acquisitions as well as organically.

I think this strategy may be successful, but it’s not what I signed up for. That’s why I sold these UK shares.

Roland Head does not own shares in Concurrent Technologies.

CVS Group 

What it does: CVS Group operates around 500 veterinary surgeries across the UK, Ireland, Australia, the Netherlands. 

By Royston Wild. The animal care market is booming as pet ownership steadily increases. It’s why I’ve been buying shares in UK-listed CVS Group (LSE:CVSG) in recent years. 

However, I slashed my holdings in the company in early September and removed my ‘buy’ rating on the stock. This follows the Competition and Markets Authority’s (CMA) decision to probe the British veterinary services industry. CVS generates the lion’s share of profits from these shores. 

The watchdog will look at issues like price transparency and whether practices adequately state if they are part of a wider group. In short, the probe could have large implications for CVS Group, a company which has steadily grown earnings through acquisitions.

It’s also possible that the CMA’s report due in 2024 could have little impact on the Alternative Investment Market (AIM) company’s investment case. Still, buying its shares at this moment requires a huge leap of faith from investors. I think there are safer ways to try and capitalise on the growing petcare market.

Royston Wild owns shares in CVS Group.

Rolls-Royce 

What it does: Rolls-Royce is a British engineering giant focusing on civil aviation, power systems, and defence. 

By Dr James Fox. I recently sold my shares in UK behemoth Rolls-Royce (LSE:RR.) as it was becoming clear to me that there were clearer value picks elsewhere on the FTSE 100. 

But it wasn’t an easy decision. Rolls-Royce still looks like an attractive proposition when observing long-term forecasts, especially in civil aviation. 

OEMs Boeing and Airbus see as many as 40,000 new aircraft being added to the global fleet internationally by 2042. 

This represents a huge market for Rolls, assuming it can expand its offer for narrow-body aircraft – traditionally the company’s engines are used on wide-body craft. 

However, there is something speculative about the recent surge. There remains plenty of unknowns as the company recovers from the impact of the pandemic, and some risks, including the impact of a global economic downturn on travel demand. 

My weighted buying price for the stock was around 95p. So Rolls was good for me, but I believe the momentum is slowing. 

James Fox does not own shares in Rolls-Royce.

Tritax Big Box REIT

What it does: Tritax Big Box REIT is a real estate investment trust that owns a portfolio of logistics warehouses.

By Edward Sheldon, CFA. Recently, I sold my holding in Tritax Big Box REIT (LSE: BBOX). I ended up selling the stock for around the same price as I bought it for. However, after dividends are factored in, I came away with positive returns.

Why did I sell? Well, the main reason was that I wanted to free up some cash to take advantage of other opportunities.

I still like Tritax Big Box a lot. It offers an attractive dividend yield, and in the long run, it should benefit from the growth of online shopping.

However, with interest rates now at a much higher level than they were a few years ago (when I bought the stock), the medium-term outlook for the property company has become a little more clouded, in my view.

As for where I reinvested the proceeds of my sale, I put the capital into Hargreaves Lansdown shares.

Compared to Tritax Big Box shares, they were trading at a lower valuation, with roughly the same dividend yield. And higher interest rates are a plus for Hargreaves, as they are creating more interest in the company’s Active Savings products.  

Edward Sheldon owns shares in Hargreaves Lansdown

Yellow Cake

What it does: Yellow Cake is a fund that gives investors exposure to uranium oxide, a key component in nuclear energy.

By Mark Tovey. When I invested in Yellow Cake (LSE:YCA) in early 2022, I had expected to hold for five years.

I was bullish on the uranium price because of figures suggesting a looming supply squeeze. The roughly 440 nuclear reactors globally gobble up more uranium than is extracted by mines each year. At the same time, there are over 50 new reactors under construction worldwide.

My thesis was simple: the price of uranium would have to rise to bring more miners online.

Yellow Cake’s stock price started 2022 at 340p and peaked at 560p this year.

While many uranium bulls believe this is just the beginning of an epic moonshot, I’m not convinced. The uranium spot price has already hit my target of $75 per pound, a figure I’d seen reported as being sufficient to bring on enough supply to meet the growing demand.

Uranium prices could still rise due to slow supply growth, but having met my price target, I opted to exit.

Mark Tovey does not own shares in Yellow Cake.

The post 5 UK shares that Fools have recently sold appeared first on The Motley Fool UK.

Strong demand

Meat supplier Cranswick (LSE: CWK) is one example, despite having grown steadily over the years.

Based on its most recent statement, I’m confident this expansion will continue. Back in July, the company reported a near-15% rise in revenue over Q1. That’s impressive considering the Ukraine war had tightened pig supply in the UK, pushing prices up. In fact, strong demand for fresh pork and gourmet products led management to raise its forecasts for the full year.

Looking ahead, I also think Cranswick’s decision to diversify into the lucrative pet foods business following its acquisition of Grove Pet Foods in 2022 is positive and should boost its bottom line and, ultimately, its share price.

Outperformer

While I regard this as primarily a growth stock, its income credentials can’t be overlook. Put simply, this company has consistently hiked its annual dividend for many years now. To me, that signals a very healthy business.

Of course, this is not to say that dividends won’t be cut going forward. Nothing is a given in investing.

Investors also need to be aware that Cranswick stock currently changes hands for nearly 17 times forecast earnings. That’s not ludicrously expensive, but nor is it screamingly cheap.

Due to this, I’m not expecting the share price to rocket anytime soon. Indeed, the 15% rise seen in 2023 so far vastly outperforms the index return and suggests that some decent half-year numbers — due on 21 November — might already priced in.

It might be best for me to wait and see if some profits are banked on the day.

Slice of cake?

Spreading my money around the market is one of the best ways to reduce risk. So it makes sense to look for hidden gems in other sectors.

For something completely different, I offer up uranium buyer Yellow Cake (LSE: YCA). Readers probably don’t need me to tell them that the £1.2bn-cap has no control over the price of what it stores. So potential holders should expect a rollercoaster ride.

That said, getting direct exposure to the grey metal has been a great bet recently. Its price rose by a third over the last quarter. Consequently, the shares are up over 40% this year.

Again, contrast this with the FTSE 250‘s 7% fall. It’s another example of why stock-picking has the potential (key word) to deliver superior returns over an index fund.

Constrained supply

Now, I don’t know where Yellow Cake shares might go in the near term, but I’m tempted to take a stake.

Uranium is used in nuclear power, considered to be one of the most environmentally friendly ways of generating electricity. As such, I anticipate demand to increase in the years ahead, given the green energy drive. Interestingly, supply is already constrained and could lead to an absolute scramble between buyers before long.

Throw in some geopolitical risks in producing countries such as Russia and Niger and I’d be willing to buy here when cash becomes available.

The post These FTSE growth stocks look like hidden gems to me appeared first on The Motley Fool UK.

Advanced Medical Solutions

What it does: AMS designs, develops, and manufactures innovative tissue-healing technology and wound-care. Previous highest market cap: c.£900m.

By Dr James Fox. Advanced Medical Solutions Group (LSE:AMS) develops and sells wound treatment products that help repair and close up damaged and cut tissue during and after surgery. These products are distributed in 80 countries around the world.

The Cheshire firm is a well-run, cash generative business with strong positioning in end markets. These positions will likely be enhanced by some exciting launches including LiquiBandFix8 – a cyanoacrylate adhesive designed to fix mesh to tissue inside the body.

I’m also anticipating increasing demand. With large elective procedure backlogs around the world, wound treatment products will likely experience a tailwind in the coming years.

Inflation is an issue, but in its full-year review the company said it had adjusted pricing accordingly. More adjustment may be required.

With a market cap just over £501m, it’s got some way to go to reach £1bn. But I’m channelling my inner Warren Buffett, It’s a quality company, and I believe it’s discounted at just 20x earnings.

Dr James Fox does not own shares in Advanced Medical Solutions Group

Yellow Cake 

What it does: Yellow Cake holds and trades uranium which it acquires from Kazatomprom, one of the world’s biggest producers. Previous highest market cap: £914m

By Royston Wild. Nuclear energy remains an unpopular sector for many share pickers. But as the world moves away from fossil fuels, stocks that supply radioactive fuel might have as much investment potential as renewable energy shares. 

This is where Yellow Cake (LSE:YCA) comes in. It holds and trades uranium, a commodity for which demand is tipped to soar as construction of new nuclear reactors booms.  

There are currently 440 reactors in operation today, according to the World Nuclear Association, and another 60 in construction. The International Energy Agency reckons global nuclear capacity will soar 42% between 2020 and 2050. 

Buying shares in this UK stock has one clear advantage over investing in a uranium producer. This is because it doesn’t expose shareholders to exploration, mine development, or production risks that can be devastating for returns. 

On the other hand, war in Ukraine poses an ongoing threat to Yellow Cake. This is because the material it acquires from Kazakhstan is shipped through Russia, leaving it vulnerable to potential supply problems.

But the nuclear industry has so far been unaffected, and on balance I think the potential rewards of owning this UK share outweigh the dangers.

Royston Wild does not own shares in Yellow Cake. 

Yellow Cake

What it does: Yellow Cake buys and stores physical uranium and looks to exploit opportunities arising from this.

By Paul Summers: I’ve been watching the rise of Yellow Cake (LSE: YCA) with interest. The share price has now doubled in five years.

Recent gains can be linked to Russia’s invasion of Ukraine. The concern is that the former – a leader in uranium conversion and enrichment – will now stop trading with Western nations. This could make the metal more expensive at a time when attitudes toward nuclear energy are improving thanks to the relatively small amount of waste it produces.

To be clear, this is not a stock for widows and orphans. Investors steered clear of uranium for a decade following the Fukushima nuclear plant accident in 2012.

Yellow Cake doesn’t pay a dividend either.

Considering that the UK stock’s marlet cap now stands at £835m, however, I think there’s a good chance the company’s valuation eventually passes the £1bn threshold if, as expected, demand begins to outstrip supply.

Paul Summers has no position in Yellow Cake

The post “The next new £1bn UK stock will be…” appeared first on The Motley Fool UK.

The nuclear option

Yellow Cake (LSE:YCA) is a fund that holds uranium, the fuel used to produce nuclear energy. By investing in it, I get exposure to the spot price of uranium without any of the exploration, development or operational risks of a mining company.

But why would I want exposure to the uranium price? Put simply, I believe the clean energy transition, in addition to a supply shortfall, could drive the uranium price up.

Uranium supply squeeze?

On the demand side, there are around 440 nuclear reactors globally, requiring some 62,500 tonnes of uranium each year, according to the World Nuclear Association.

Meanwhile on the supply side, mines produced 48,303 tonnes of uranium in 2021 – or 77% of the utilities’ annual requirements.

How is this shortfall being plugged? Utilities are having to dig into their stockpiles, which are sizeable (estimated at 200,000 tonnes globally in 2020).

Although utilities still have rainy-day funds, I believe a supply crunch could come. Stockpiles can’t fill the gap between demand and the supply mined indefinitely.

At the same time, Yellow Cake has bought up 8,000 tonnes of uranium since 2018. Its Canadian counterpart, the Sprott Physical Uranium Trust, has taken 26,000 tonnes off the spot market since 2021. In total, that represents 70% of the uranium that’s mined worldwide in one year.

A radioactive rethink

There are 52 nuclear reactors currently under construction globally. The Japanese are planning on restarting 17 shutdown nuclear plants and developing next-generation reactors, a major policy shift on nuclear energy a decade on the from the Fukushima disaster. Even notoriously anti-nuclear politicians in Germany are looking at extending the operating life of the country’s three remaining nuclear reactors as winter blackouts loom.

Nuclear energy offers a reliable source of baseload power with zero carbon emissions. For that reason, it wouldn’t surprise me to see demand for uranium continue to increase over the coming decade.

Once stockpiles are depleted, I feel the price of uranium would have to rise to bring marginal miners online to fill the deficit in production.

Of course, this could take many years. Or, more worryingly, another nuclear catastrophe could cause the world to fall out of love again with uranium. I have to bear this in mind as a risk to my investment.

How high could it go?

Uranium has been in a bear market since the 2011 Fukushima disaster. The price of uranium dropped like a stone from $71 per pound to an all-time-low of $21 in late 2016. Today, it floats around the $50 mark.

How high might it go?

According to Rick Rule, former President and CEO of Sprott US Holdings, an incentive price of $75 per pound is needed within five years.

He said in an interview in June: “Either that, or the lights go out. Those are the only two choices.”

Assuming Rule is right, that could mean a 50% upside over the next five years.

I’ll continue buying the shares, as I think the price of uranium per pound could even overshoot $75 given a strong enough supply squeeze.

The post 1 stock that’s a great long-term pick appeared first on The Motley Fool UK.

Rapid earnings growth

First, the Numis (LSE:NUM) share price is up 8% in the last three months. At the time of writing, the shares are trading at 259p.

For the year ended September, between 2017 and 2021, the broking firm’s earnings per share (EPS) rose from 27.4p to 54.2p. By my calculation, this results in a compound annual EPS growth rate of 14.6%. As a potential investor, I find this rate of earnings expansion extremely attractive.

Over the same period, revenue increased from £130m to £215m. What this tells me is that the business has been performing for its shareholders year in, year out.

Yet I’m always aware that this growth isn’t guaranteed in the future.

For the three months to 30 June, revenue was £40m, which was up quarter on quarter. And there was no change to full-year expectations in the report. 

However, the company stated that deal volume may decline in the event of a recession. This may lead to lower profit margins.

Nevertheless, the investment banking segment has enjoyed improved performance and there’s a strong future pipeline of merger and acquisition activity. 

Glowing financial results

Second, Yellow Cake (LSE:YCA) has seen its shares climb 13% in the last week. Currently, they’re trading at 417p.

For the year ended March, between 2019 and 2022, EPS rose from ¢39 to ¢260. This results in a compound annual EPS growth rate of 60.6%.

As a holder of physical uranium, it’s currently benefiting from the rapidly rising spot price of uranium. This may become a vital energy source in the future, as governments may plan to move away from oil and gas. 

There’s the risk, however, that countries look to renewables and bypass uranium, which could be bad news for the business.

Assuming it does have a strong future, for the three months to 30 June, the firm added 3m pounds of uranium to its holding and embarked on a $3m share buyback scheme in April.  

Furthermore, for the 12 months to 31 March, net profit climbed to $417.3m, up from $29.9m during the same period in 2021.

Additionally, the firm saw the value of its uranium holdings increase 203% year on year. 

Overall, both of these companies display exciting rates of earnings growth. What’s more, the near future may also hold promise for both Numis and Yellow Cake, through M&A activity and moves to use uranium and nuclear power more widely. As such, I’ll add both businesses to my portfolio soon to hold for the long term. 

The post 2 hot growth stocks that could fly this month appeared first on The Motley Fool UK.