Motley Fool Australia

Why ASX uranium shares could run even hotter in 2021

ASX uranium shares represented by yellow barrels of uranium
Image source: Getty Images

There’s no arguing with the numbers.

The past year (and then some) has seen the leading ASX uranium shares truly light up.

The Paladin Energy Ltd (ASX: PDN) share price, for example, is up 415% over the past 12 months. ASX uranium miner Deep Yellow Ltd (ASX: DYL)’s share price is up 246% over that same time.

Things have continued apace in 2021, with Deep Yellow shares up 24% in the calendar year and Paladin shares up 54%.

That more than handily outpaces the one-year 7% gains posted by the broader All Ordinaries Index (ASX: XAO), not to mention the 0.4% loss on the All Ords so far in 2021.

But the run higher for ASX uranium shares like these could only just be getting started.

Why ASX uranium shares may have a bright future

Australia may not opt to use uranium for its own power sources. Though Australia – both fortuitously and somewhat ironically – has among the world’s largest accessible uranium deposits buried beneath its soil.

And demand for uranium in other parts of the world is picking up as the globe attempts to wean itself away from carbon-based fuels. This is an increasingly important focus for environmental, social and governance (ESG) investments.

As Bloomberg reports, “Uranium producers are reaping rewards from the flood of money pouring into electrification and environmental, social and governance investing themes”. That’s seeing demand begin to outpace supply for the first time in a decade.

According to GJL Research analyst Gordon Johnson, “Uranium sector supply/demand balance is the tightest we’ve seen since pre-Fukushima.” Fukushima was the site of the post earthquake nuclear meltdown in Japan in 2011.

Pointing to the rising importance of ESG, Johnson says:

When you add to this, uranium stocks are now gaining attention from ESG investors due to their low GHG [greenhouse gas emissions] footprint and quintessential role as a clean energy alternative, we see the set-up for incremental/new Uranium investments as opportune.

Johnson said another potential tailwind for uranium shares is that institutional funds may be looking to increase their exposure to the sector. “If true, this could go on for a long time as they build significant positions ahead of the inevitable price rise in the commodity.”

Today’s share price moves

Both Paladin and Deep Yellow shares are selling off today. While the All Ords is down 1.1% in late afternoon trading, the Paladin share price has fallen 4.1% and the Deep Yellow share price is down 7% at the time of writing.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…