No Pain For These 4 Powerful Market Segments Generating Big Gains

source: seeking alpha

There are many tales of woe over the huge correction in the stock market, as the majority of companies could take as much as several years to recover to levels prior to the collapse, maybe longer, depending on how the government, business, and people respond after the smoke clears going forward.

While there has been a dismal weight hanging over the market, there has in fact been a surprising number of segments that have been doing well over the last month or so, and have a good chance of continuing to do so for some time.

In this article we’ll look at those markets, and examine why they have been doing so well, and what the future looks like for them.

The market segments

The four segments generating significant returns to traders and some investors have been gold, uranium, biotech, and oil storage. Taking a sampling of publickly traded companies from each segment, I found that the majority have had their share prices move up by around 70 percent on average, and several of them even doubled in price since the end of March.

Included in the companies I researched were Kinross Gold (KGC), Gold Fields (GFI), Harmony Gold (HMY), Uraneum Energy Group (UEC), Energy Fuels (UUUU), Denison Mines (DNN), Nordic American Tankers (NAT), Ardmore Shipping (ASC), and Teekay (TK), among a number of others.

I’m not going to list the biotech stocks because there have been so many of them, and most of them are jumping after an announcement related to either positive news associated with COVID-19 vaccine studies, or to tools and equipment used to treat or prevent the virus.

This is somewhat different than the other three segments, which have had the rising tide lift almost all ships. In the biotech segment it’s different because the stock prices have primarily been moved by company announcements, which haven’t overall, had an impact on the share price of many other companies competing in the same space.

Another differentiator is most of the biotech companies have rapidly dropped back to a much lower price after the stock moved upon in response to the news. The other segments, in general, have found more support once the share prices started climbing. Outside of a few exceptions, they have steadily and consistently pushed up in price since the beginning of April; although they have experienced a significant amount of volatility during that time as well.

What’s driving the segments

We’ve already covered the catalysts behind the robust biotech segment, now we’ll look at the catalysts that are driving gold, uranium and oil storage. We’ll start with gold.

Of the four segments listed here, gold has been the one with the longest period of price support, primarily because of the slashing of interest rates by the Federal Reserve, and most recently, the stimulus by the U.S. and other governments, along with the creation of money to support the economy with much of the businesses and individuals in lockdown.

Gold was already starting to increase in price, but this accelerated the process, as well as produced a potentially higher ceiling than before the impact of COVID-19 on the economy because of the steps taken by the government in response to it.

Uranium prices have also been impacted by COVID-19, primarily as a consequence of Kazakhstan shutting down mines, as well as Cameco (CCJ) in Canada. Bloomberg said this: “Shutdowns wiped out about 46 million pounds, or about 35%, of annual global uranium output, over three weeks.”According to the World Nuclear Association, as of 2018, Kazakhstan accounted for approximately 28 percent of global uranium production. It also has 12 percent of the world’s uranium resources. For those reasons, what Kazakhstan does with its uranium resources has a significant impact on supply and prices.

It is believed by some that this could be the beginning of a new uranium bull market. That could be true, but whether it is or not, for now, the price of uranium has found support because of the huge cut in production and supply, and that should be a boost for the industry; at least for a period of months.

Since I expect the uranium segment to remain volatile, it gives a lot of opportunity for traders in particular to benefit from changed economic environment of uranium.

As for oil storage, the shutting down of much of the world has resulted in a huge glut of oil as demand has plunged. The result has been companies hunting for places to store it. Decisions by producer like Saudi Arabia and Russia to reduce production was too little to late. As a result, the world is currently flooded with oil, and it’ll take a long time to sell it off.

With storage tanks rapidly filling up, the shipping and tanker industry has caught a bid because they’re the main option left for storage, outside of companies starting to shut up wells and use them as storage in the ground.

The major question for tankers is what the upside will be once they have reached full capacity. They could increase the daily costs of storage, but that would presumably have a limited upside.

There remains a lot of potential with tankers, but I see them as not having the time duration the other segments mentioned in this article have. For now, some of them should continue to do very well, but that will probably dry up quickly once their ships are full.

Looking ahead

As just mentioned, the tanker segment, while still worth taking short-term positions in for quick gains, will probably be the first of the segments listed here to run out of steam because of the limited upside once full storage capacity is reached.

For the biotech market, the time it’ll take to develop a vaccine to treat or help prevent COVID-19 will be a long one, and during that period we’ll continue to hear of various potential candidates for the vaccine, and other ancillary products and services that will grow in response to the new realities.

Beyond the vaccines, for example, I’m thinking of the companies making masks or providing telemedicine services, among other related products and services.

Concerning uranium, it’s unlikely there will be a sense of urgency to reopen some of the mines that have been shuttered in the near future. While that provides some opportunity for other companies, it isn’t going to move the needle on the price of uranium one way or the other.

For that reason, I think we’ll see uranium prices not only retain support, but likely continue to move up for some time because demand hasn’t changed, while supply has been significantly cut back.

In regard to gold, that almost certainly will enjoy the longest period of sustainable growth of the segments listed here. Not only is it good for traders, but some of these companies will excellent holdings over the next few years.

That said, gold producers do have some of the same challenges associated with COVID-19 that these other segments have, and conditions warrant it, they could be forced to shutter more of their production as well.

Any breakout of coronavirus among miners could trigger shutdowns. The question for many of the miners than will be whether or not the resultant boost in the price of gold will be able to offset the loss of production, and at what level.


The strong performance of these four market segments under the current economic conditions is extraordinary, and all of them should continue to generate profits for discerning traders.

With many companies in the segments having made big runs over the last month, we do need to be careful not to chase the price at these highs. I would wait for an inevitable pullback in all these sectors, looking for a better entry point.

While I have been trading in and out of a number of these stocks, generating some nice returns, the major reason for writing about them was to show that even in the midst of the negative media reports and challenging economic conditions we face, there will also be market segments that will go against the grain.

These are four that should do well in the short term, and with the exception of tanker oil storage companies, should continue to have legs in the months ahead, and with gold and uranium, possibly several years.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I will be investing in some of these companies in the near future.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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