GIS Earnings And Uranium

In Monday’s blog I recommended shares of General Mills (GIS) ahead of earnings. Unfortunately, all the price increases they have pushed through started to hit volumes in a big way during the quarter. Price was up another 11% but this time it hit volumes which declined 6%. The WSJ’s Aaron Back was correct in his column three weeks ago [SUBSCRIPTION REQUIRED] that price increases may be at an end as consumers have been pushed to the limit. As a result, organic sales came in below expectations at +5%. CEO Jeff Harmening said: “In retrospect, perhaps it shouldn’t have been a surprise, but it certainly was an order of magnitude.” Shares of GIS fell 5.17% on heavy volume Wednesday, breaking well below its 200 DMA for the first time in at least two years.

Jinjoo Lee had an interesting article in today’s WSJ Heard on the Street on uranium (“How Uranium Can Be A Shelter From Economic Meltdown” [SUBSCRIPTION REQUIRED]). While fossil fuels – oil and natural gas – are down big this year on fears of a downturn, uranium prices and stocks have been strong. Even a runup in prices isn’t likely to kill demand because the cost of fuel for nuclear power plants is a relatively small part of a plant’s operating costs, according to Lee. In other words, uranium could be a defensive energy play – especially as many countries extent the lives of existing nuclear plants like California’s Diablo Canyon. In his excellent book Power Hungry: Electricity And The Wealth Of Nations, Robert Bryce argues that nuclear energy is an important part of a long term solution balancing electricity demand with environmental concerns. The Global X Uranium ETF (URA) looks like a nice way to play it. Canadian uranium mining company Cameco (CCJ) is by far the largest component of the ETF at 23.55%.