Happy New Year to Barchart readers everywhere!
As I write this, a few minutes into the first trading day of 2025, the markets are pointed higher. The S&P 500 looks to deliver a three-peat over the next 12 months. In 2024, the index gained 23.31%, its second consecutive year with a 20%+ annual return.
While another 20% return in 2025 would be nice, the streak would still fall short of the four-peat achieved between 1995 and 1998--and it came oh so close to a fifth consecutive year with a 20%+ annual return, missing by 47 basis points, up 19.53%.
With inflation still in the picture and a potential economic slowdown from Trump’s tariffs, the index is unlikely to deliver this year, 2026, and 2027. The record looks safe.
We’ll find out in 364 days whether a three-peat is possible.
Meanwhile, New Year’s Eve's unusual options activity suggests investors remain gung-ho about nuclear energy. Denison Mines (DNN), the Canadian uranium producer, had the top Vol/OI ratio on the day, at 151.78. Lyft (LYFT) was the only other stock with a Vol/OI ratio in triple digits.
If you’ve got the patience to ride this bet out, it’s an inexpensive play on the nuclear movement. But, it’s not the only play.
The 745 DTE
The Denison Mines Jan. 15/2027 $4 call has a DTE of 745, which is two years and two weeks from now. A lot can happen in that time. SMRs (small modular reactors) could become a force in energy production or go the way of the Dodo bird, potentially benching nuclear power once more, as happened after the Fukushima tsunami in 2011, which saw nuclear output slow considerably.
There is no question that nuclear energy took a big step forward in 2024. The U.S. Department of Energy’s Dec. 31 post 11 Big Wins for Nuclear Energy in 2024 highlights some of this past year’s success stories.
“The White House released nuclear deployment targets this year to expand domestic capacity by 200 gigawatts (GW),” the DoE’s post stated.
“The plan outlines more than 30 actions the U.S. government can take to add 35 GW of new capacity by 2035 and achieve a sustained pace of 15 GW per year by 2040.”
The supply of safe nuclear energy should continue to move higher regardless of the Trump administration’s love of natural gas. Although Trump’s energy secretary pick, Chris Wright, is a veteran natural gas executive, he isn’t against the use of nuclear energy--he sits on the board of Oklo (OKLO), a company that specializes in the development of advanced reactor technology for the production of electricity through the use of nuclear fission.
As an S&P Global Market Intelligence report from November points out, many of Trump’s biggest supporters, including Elon Musk, are pro-nuclear, so the industry isn’t concerned about the change in administration.
Why Denison?
Analysts are generally positive about uranium prices in 2025. The Globe and Mail reported comments on Dec. 17 from National Bank Financial analyst Mohamed Sidibé, who sees uranium as the best bet in critical minerals.
“A limited supply growth and continued favorable outlook for demand are all beneficial for uranium equities which, in our books, still present some opportunities despite the easy money having been made,” The Globe reported Sidibé’s comments.
The analyst’s top pick is Denison, which has an Outperform rating and a target of CAD$4.30 ($2.98), approximately 50% higher than where it’s currently trading.
Twelve analysts cover Denison stock. All rate it a Buy, and the median target price is $2.74, significantly higher than its current trading price.
Assuming it gets to $3 by the end of 2025, which would be a 70% gain over 24 months, it would need another 42% to be in the money heading into 2027 and the Jan. 15 expiry.
However, according to S&P Global Market Intelligence, the company is expected to lose $0.04 a share on a normalized basis in 2025, $0.02 in 2026, $0.01 in 2027, and finally, generate an 11-cent profit in 2028, four years from now.
If nuclear energy takes off over the next four years, those estimates are likely very low, but the risk remains in play.
Paying nearly 14% of its current share price for a 25-month hold isn’t the best bet, but if you’re confident about uranium and nuclear energy, $25 is hardly an ordeal.
A Possible Alternative
One of the best reasons to own ETFs is that they allow you to make sector bets without buying individual stocks.
The VanEck Uranium & Nuclear Energy ETF (NLR) is a popular ETF among uranium and nuclear energy investors. Launched in August 2007, it traded over $133 in its first six months and then spent most of the next 16 years in a tight range between $40 and $60. Since March 2023, it’s been up 62%, with a couple of big corrections in 2024.
However, the advantage of NLR over other uranium-focused ETFs is that it combines utilities, miners, and service providers, reflecting the overall scope of the nuclear energy industry.
Denison is not a top 10 holding, but it is in the top 20 with a 3.70% weighting. Over the past year, NLR is up 18.2%, slightly less than DNN, but with far less company-specific risk.
Looking at its options activity so far today, I like the look of the Jan. 17 $86 call.
The ask is a reasonable 2.8% of the share price, which puts the breakeven at $88.40, or 4.6% higher. However, the buyer got all 40 contracts at $1.50 each in this trade.
The buyer got an even better deal, securing the right to buy $344,000 of the ETF for $6,000 down, or 1.8% of its share price. This puts the breakeven point at $87.50, or just 3.5% higher than where it’s trading.
That’s more than doable.
