Investment University's Profit from Uranium

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Investment University’s Profit from Uranium Investment U

John Wiley & Sons, Inc.

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Investment University’s Profit from Uranium

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Investment University’s Profit from Uranium Investment U

John Wiley & Sons, Inc.

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Copyright © 2007 by Investment U. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. ISBN 0-470-12234-X Printed in the United States of America. 10

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Contents

From the Publisher

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Introduction

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Our 12 Timeless Rules of Investing

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Part I The Twenty-First Century Fuel Crisis Has Driven This Commodity Up 494 Percent . . . And the Supply Gap’s Getting Worse

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Part II How Uranium is Generating Huge Returns . . . Now and in the Future . . .

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Author Biographies

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Here’s How to Get Updates on Every Recommendation in This Report . . .

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From the Publisher

If you’re new to investing, you should know up front that our goal is to help you master the investment principles that can dramatically boost your portfolio returns and to show you how you can consistently succeed in all kinds of markets. We strive for this goal by delivering independent, no-nonsense investment advice on how to build long-lasting wealth as it’s done in the real world. We do so primarily through our free e-letters, written in plain English and using real-life examples, not textbook mumbojumbo. The Investment University research team that has assembled this report consists of some of the most successful and profitable people in the industry, like Dr. Mark Skousen (Investment U chairman, former Columbia Economics professor and editor of Forecasts & Strategies), Alex Green (Oxford Club Investment Advisor and 16-year Wall Street veteran), Horacio Marquez . . . and a host of others.

This is our very own “dream team” of experts we turn to for guidance and gains. Frankly, they’re the best at what they do: They generate more profits in any market than anyone else we know. And each of them fits the two key criteria that we demand of our experts: 1. They must each have a proven track record showing the ability to consistently pull profits from any market. 2. They must be able to communicate their strategies—no matter how complex— into simple ideas that our readers can easily apply to their own unique situations. You should also know this about Investment U: Since it began in 1999, we’ve tried to deliver actionable investment wisdom to our readers each week. Many of our strategies, techniques, or insights go against the prevailing conventional

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wisdom. But at a time when most investment “how-to” books peddle stale ideas like “Buy and Hold” or “Dollar-Cost Averaging,” we show you what really works today and how to make it work for you. With that, I leave you to enjoy our report: Investment U’s Profit from Uranium. And I encourage you to visit our web site at

www.investmentu .com/uranium to get our latest updates for the recommendations you’re about to read. I hope you enjoy learning how profitable investing really works. Good Investing, Julia Guth Founder, Investment U

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Introduction

Right now, a fuel crisis is growing throughout the world. It’s one that dwarfs the great oil shortage of the 1970s. In fact, the need for fuel already exceeds the demand for oil by 139 times. And few investors know—or even understand—the size and scope of this opportunity. But take notice: The supply of uranium, the raw stuff that creates nuclear power, is already so short that worldwide prices have doubled in 12 months, tripled in 24 months—and are soaring higher by the day. And it’s certain to move even higher over the next few years. . . . With hundreds of new nuclear reactors anticipated in the next three decades, your investment dollars have NEVER been in greater demand . . . and Wall Street is just now starting to catch on. Here’s the proof. . . . From July to November of 2006, the price of oil dropped 25 percent, from almost $80 to $60 per barrel. Many who bought oil stocks watched

helplessly as their investments fell through the floor: But oil wasn’t the only commodity that dropped like a rock. From May to September of 2006: • The price of natural gas crashed 49.5 percent. . . . • Gold plummeted 23.2 percent. . . . • The measurement of commodities prices, the CRB Index, buckled 16.7 percent. . . . But the price of uranium oxide repeatedly hit 52-week highs, soaring 23.8 percent in the same period. For 2006, uranium oxide bolted higher by 42 percent. OPEC tries to manipulate the price of oil by turning on and off the pumps whenever it likes. But that strategy doesn’t always work . . . and when the cartel loses control, the price spirals downward.

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But uranium is different. . . . There isn’t a “cartel” that controls the price of uranium. It’s negotiated freely in the markets on a weekly basis, between miners, enrichment companies and end users. At the end of the day, the price of uranium is controlled by “supply and demand,” which should only keep the price moving higher in the years to come: In the history of the world, there’s never been a energy-making commodity in shorter supply. Current uranium demands are way above production, which has been falling the past few years. In the United States, production of uranium fell 3 percent in the first quarter of 2006 alone.

But with 16 percent of the world’s energy being produced by nuclear reactors, and 37 new nuclear reactors on the drawing board for the next 12 months alone . . . demand for the fuel stands to increase another 16 percent in the same period. This stands to drive the price of uranium through the roof . . . and produce staggering returns for investors who get in early. . . . The advice and recommendations in this report come from a dedicated group of investment professionals, who have identified specifically the plays on this powerful fuel that will generate portfolio winners for years to come. We invite you to study this book carefully. . . . It profiles some of the key companies Investment U has identified, so you can take

Oil’s Quick Retreat

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Uranium’s Steady Rise

maximum advantage of the exploding market for this fuel. P.S. We’ve built an exclusive web site dedicated to updating the recommendations that follow. Only those who have purchased this re-

port will have access. I urge you to visit http://www.investmentu.com/china to get the latest pricings and material information regarding these specific investment opportunities.

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Our 12 Timeless Rules of Investing

1. An attempt at making a quick buck often leads to losing much of that buck. The people who suffer the worst losses are those who over-reach. If the investment sounds too good to be true, it is. The best hot tip we’ve found is “there is no such thing as a hot tip.” 2. Don’t let a small loss become large. Don’t keep losing money just to “prove you are right.” Never throw good money after bad (don’t buy more of a loser). When all you’re left with is hope, get out.

more than you think and rise higher than you can imagine. In the short run, values don’t matter. 5. When a stock hits a new high, it’s not time to sell . . . something is going right. When a stock hits a new low, it’s not time to buy, something is wrong. 6. Buy and hold doesn’t ALWAYS work. If stocks don’t seem cheap, stand aside. 7. Bear markets begin in good times. Bull markets begin in bad times.

3. Cut your losers; let your winners ride. Avoid limited-upside, unlimited-downside investments. Don’t fall in love with your investment; it won’t fall in love with you.

8. If you don’t understand the investment, don’t buy it. Don’t be wooed. Either make an effort to understand it or say “no thanks.” You can’t know everything, so don’t stray far from what you know.

4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships. Fighting the prevailing “trend” is generally a recipe for disaster. Stocks will fall

9. Buy value, and sell hysteria. Paying less than the underlying asset’s value is a proven successful strategy. Buying overvalued stocks has proven to underper-

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form the market. Neglected sectors often offer good values. The “popular” sectors are often overvalued.

don’t hesitate. Learn more from your bad moves than your good ones.

10. Investing in what’s popular never ends up making you any money. Avoid popular stocks, fad industries, and new ventures. Buy an investment when it has few friends.

12. Expert investors care about risk; novice investors shop for returns. If you focus on the risks, the returns will eventually come for you. If you focus on the returns, the risks will eventually come for you.

11. When it’s time to act, don’t hesitate. Once you’re in, be patient and don’t be rattled by fluctuations. Stick with your plan . . . but when you make a mistake,

To receive many more of these investment truths and much more, sign up to receive the FREE, twice weekly Investment U E-Letter. Just visit: http://www.investmentu.com.

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I The Twenty-First Century Fuel Crisis Has Driven This Commodity Up 494 Percent . . . and the Supply Gap’s Getting Worse

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Investors who move into uranium have a unique opportunity to buy low before the supply situation gets even worse . . . and given the current outlook from uranium industry experts, it will. . . . According to a confidential report from a top Merrill Lynch analyst, the global gap between supply and demand of this precious fuel is already a whopping 15 million pounds—nearly 20 percent below worldwide demand. This shortfall is expected to double in the coming months. In fact, the demand is growing so fast that the supply chain may never catch up. This demand has driven uranium to unprecedented highs, to $60 per pound for the raw, unprocessed ore mined from the ground. By comparison, this yellow metal was worth exactly $20 per pound two years ago, and only $10.10 a pound in March 2003—a 494 percent gain . . . A look at the facts shows how widespread and growing this nuclear boom is. Just consider that:

• Nuclear energy now supplies 16 percent of the world’s total power; • In addition to the boom in China (BusinessWeek calls it the “largest buildout” in the history of energy), 23 new nuclear reactors are under construction in 10 countries; • A whopping 441 power plants in 36 countries now depend on uranium to run steel plants, auto assembly lines, mass transportation, and thousands of factories that make everything from women’s dresses to bobble-head dolls; • Nuclear power now heats, lights, and cools an estimated 350 million homes and businesses worldwide, powering computers, bank transactions, telecommunications—and even a third of all the schools in Europe and the industrialized nations; • 15 reactors in the United States have been granted licenses to extend their

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operating lives from 40 to 60 years. . . . And most others are expected to apply for the same extension;

problems caused by a century of burning fossil fuel. And the current facts of our planet tell the story. . . .

• What’s more, the environmental groups are embracing uranium as a clean, economical, and sustainable alternative to burning fossil fuels. . . .

• Over the past 100 years, the surface temperature of the Earth has risen 1 degree Fahrenheit—causing the Earth to experience 19 of the hottest 20 years on record—all in the last 26 years.

In America alone, nuclear power has reduced the emission of greenhouse gasses by 128 trillion tons per year . . . it kept 1.6 billion tons of carbon dioxide out of the air worldwide in 2005 . . . and it’s kept 90,000 tons of toxic heavy metals—the by-product of burning coal for electricity—out of the air. It’s no surprise that nuclear energy is streaking skyward, driven by sky-high oil prices and the toxic consequences of burning coal . . . One thing is clear right now: The consumption of uranium is not something to just sit back and think about for the future. . . . The boom is here, and it’s not likely to abate any time soon.

The Four Indelible Reasons Uranium Demand Will Continue Far into the Future

• Carbon dioxide in the atmosphere is higher now than in the last 150,000 years, triggering irreversible damage to our ozone layer, as seen in rising temperatures. • According to the IPCC, if global warming is not stopped, the Earth could heat up another 3 to 10 degrees Fahrenheit by the end of this century, triggering massive heat waves, more ferocious hurricanes from warmer water, and flooded coast lines. • Continual fossil fuel consumption will eventually hurt global ecosystems with up to 1 million species of plants and animals potentially committed to extinction by 2050.

Right now, the world is screaming for two things: a cleaner environment and new sources of energy other than fossil fuel. Because of this, the future of nuclear power has never looked more promising. It also offers answers to the four most pressing questions we’re likely to face in our lifetimes:

2. Fossil fuels are just about gone. Fact is, the environment isn’t the only problem. The Energy Information Administration predicts that total global consumption of energy will grow 57 percent from 2002 to 2025—fueled by the world’s population growing at an exponential rate.

1. Global warming. The environment desperately needs a solution to the

• The heart of the matter is fairly simple: Very shortly, more than 9 billion people will need electricity. And

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there just isn’t enough coal and oil to supply that tremendous need. • Through the middle part of the 1900s, the world’s population grew at a steady, but not alarming, rate. Now, though, the world’s population is multiplying at a rate never seen before. Currently, just over 6 billion people live on this planet. But by 2050, census officials predict that the earth will be inhabited more than 9 billion people. • More people simply means more need for power. And greater demand translates to more and more natural resources consumed each day. • In 2003, the International Energy Agency stated the world has enough fossil fuel reserves to meet energy demand through 2030. However, by 2030, new reserves must be found in order to quench the world’s evergrowing thirst for energy. • Some scientists predict that in 75 years all of the world’s coal, natural gas, and oil will be gone. If you’re shrugging your shoulders in disbelief, just consider that China alone used 28 billion tons of coal from 1980 to 2000. • At this point, it’s essential for the world to find a solution to the growing population-energy demand crisis, and the environmental damage being caused by burning fossil fuels. And, there’s an answer already in the works: nuclear energy.

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3. Coal is the dirtiest natural resource. Coal is one of the largest greenhouse gas-emitters, creating sulfur dioxide and nitrogen oxide—both of which create smog and damage the ecosystem. And coal is one of the single-largest contributors to acid rain, which can transfer mercury to our water systems: • Though coal may be the instantgratification choice of energy consumers now, many countries are boldly moving toward cutting down on the pollutant. Case in point: The UNECE predicts that by 2030 coal could lose its status as the world’s leading energy source—potentially surpassed by nuclear energy. • Burning coal wastes more energy than it produces. Simply put, coal is an easy way to supply energy, but it’s wasteful and dirty—not a good combination for long-term use, especially when eco-conscious consumers are begging for cleaner sources of energy. • President Bush presented the “Advanced Energy Initiative,” which promotes nongreenhouse gas-emitting energy sources. Much of this new plan is to reduce the ozone-destroying pollution prevalent in the United States, which through coal-fired plants alone produces 10 percent of the world’s greenhouse gases. 4. More nuclear reactors. The world is building new nuclear reactors at a never before seen rate. In fact, it’s been predicted that there will be over 2,600 nuclear reactors in operation by 2030:

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• China has completed 10 new reactors within the last four years, with 7 under construction right now. • India is planning to build 20 to 30 new nuclear reactors in the next 15 years. Eight new reactors are currently under construction. • Russia has 31 operating nuclear reactors and is finishing construction on 3 new reactors right now. • South Korea will bring 8 new reactors online over the next decade. • France currently receives 75 percent of its power from nuclear rectors and exports $4 billion a year in electricity. As other countries begin to see the economics of exporting nuclear generated electricity, construction will speed up even more. • Major publications and environmental groups are heavily favoring nuclear power as an “in-demand” source of power. USA Today reports that: “Nuclear power creates virtually none of the pollution that causes climate change, and delivers electricity cheaper than other forms of generation do. If more reliable and cleaner energy is the goal, nuclear power has to be part of the solution” (“Former Critic Sees the Light,” USA Today, September 17, 2005). Even Greenpeace founder Patrick Moore says: “Nuclear energy is the only nongreenhouse gasemitting power source that can effectively replace fossil fuels and satisfy global demand.” (Dr. Patrick Moore, PhD; Dr. Moore’s Statement to

U.S. Congressional Committee, October 19, 2005.) While the United States put a moratorium on nuclear reactor development for more than 20 years, that hasn’t been the case throughout the world. France, for example, generates almost 80 percent of its energy from nuclear power. Amazingly, Europe is substantially ahead of the rest of the world in nuclear power—a trend that began several decades ago. But in the early 1990s (shortly after the Chernobyl incident), the building of nuclear reactors was halted in Europe. Yet in 2005, Finland began construction on a pressurized water reactor designed by the French company Areva—the first new nuclear power plant developed in the country in over a decade. And countries like China and India are racing forward to build nuclear power plants as fast as they can. India presently has 14 nuclear reactors in commercial operation, and 8 under construction. Global demand for nuclear power has never been greater. And with this torrid growth, the demand for uranium is surging forward. But again, the kicker here is China. The People’s Republic recently committed to spending $50 billion to build more than 30 new nuclear reactors. . . .

China: The “Largest Buildout” in the History of Nuclear Power Less than three years ago, the Chinese government committed to spending $50 billion to

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build more than 30 new nuclear reactors, launching what BusinessWeek calls the “largest buildout” in the history of nuclear power generation. It all started on a crisp autumn day in 2003, when seven executives from five countries flew into Beijing Capital International Airport. . . . Officials from France’s giant Framatome Corporation . . . Westinghouse Electric and GE from the United States . . . Mitsubishi Heavy Industries from Japan . . . Russia’s Atomstroyexport . . . Paris-based Alstom, and Germany’s Siemens. They arrived in Beijing to attend a conference held by the Chinese government, officially dubbed the “Nuclear Power Global Bidding Preparation Conference.” In one room sat the world’s largest nuclear equipment builders, undergoing talks to launch the largest initiative to build nuclear-powered generators the world has ever seen. Today, we’re seeing the results of this historic event. . . . And the bottom line is this: In addition to the 10 nuclear power plants already operating in China, the government in Beijing is adding a whopping 30 more nuclear power plants. This alone will give China nearly 11 percent of the world’s nuclear energy capability which, by itself, means a 360 percent increase in nuclear power capacity. But according to a report titled “The Future of Nuclear Power” put out by a blue-ribbon commission headed by former CIA director John Deutch, China will require the equivalent of 200 full-scale nuclear plants to meet its energy needs. According to Wired magazine: “A team of Chinese scientists advising Beijing leadership puts the figure even higher: 300 gigawatts of nu-

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clear power, not much less than the 350 gigawatts produced worldwide today” (Reiss, Spencer, “Let a Thousand Reactors Bloom,” Wired, September 2004). In addition, China burns coal for nearly 80 percent of its electricity, fouling urban air and leaving a brown film on city surfaces. And the future price of oil remains a question mark, as always. The Asian country is going mad trying to figure out how to power its growth . . . Wired magazine said, “China could build a Three Gorges Dam every year forever and still not meet its growing demand for electricity.” Functionally, it means that China will have to spend a fortune on uranium, because nuclear power is the only realistic way China can triple its electricity output over the next 15 years—which would barely keep it on pace with demand. If you’re wondering just how big the demand from China is, consider this: Uranium imports to China are due to increase from 2.5 million pounds per year to a staggering 44 million pounds per year, according to the Australian Foreign Ministry, with whom China’s been negotiating. That’s an increase of 1,760 percent. . . . And it equals nearly one-quarter of the world’s total supply of this fuel. In 2005, the Chinese government spent roughly $72 million on uranium. But according to current government estimates, China is about to increase that expenditure to $119 billion in the months ahead. . . . The massive need for nuclear power and uranium means the demand for uranium is creating a supply gap, the size of which has never before been seen in peacetime.

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A Shortage of Historic Proportions—And Profits The fact is, the uranium shortage has hit crisis levels . . . and the supply gap continues to grow by the day. The reasons are simple. After the Cold War, Nuclear arms production ground to a halt. There was enough uranium to feed existing reactors for years. And, in 1993, the United States signed a deal with Russia to feed U.S. nuclear reactors from dismantled Russian warheads. Consequently, uranium prices fell. . . . It became economically unfeasible for companies to speculate on new mines or processing operations. The market just dried up. . . . Today, “above-ground” uranium is at an alltime low. According to the market’s leading journal, The Uranium Market Outlook, the reasons are: • 30 years of underinvestment; • Stringent regulations; and • An overall lack of exploration for uranium deposits. The prestigious firm International Nuclear, Inc., just reported that commercial reserves of uranium fell by 50 percent from 1985 to 2003. It also reported that, in 2004, only 58 percent of the uranium consumed in the world came from mining. The rest came from the depletion of existing reserves. World-renowned nuclear analyst Jan Willem, of the firm Storm van Leeuwen, showed that the world’s recoverable resources are waning . . . with the most prominent

drop to come in the next 10 years . . . starting now. Given that there are currently 37 new nuclear reactors currently under construction worldwide, with 70 more planned to come . . . the price of uranium will seem cheap at current levels. But there’s even more to the story . . . according to a U.K. study, there will be over 2,600 new reactors by 2030. That’s a 490 percent increase in worldwide nuclear reactors. Many companies and countries are going to begin buying up nuclear fuel now . . . so when hundreds more nuclear reactors come online throughout the next decade, they won’t have to pay sky-high prices. And you can be sure of one thing . . . they have the money to buy the fuel NOW, instead of waiting until it’s up four of five times from the current price. Here are two recent developments that absolutely prove the case for higher uranium prices: 1. In September of 2006, Australia announced that production from the countries three mines fell 27 percent in the first six months of the year. 2. In the first six months of 2006, production from Canada’s three mines declined 33 percent, compared to the same period in 2005.

There just isn’t enough uranium to supply the world’s current needs . . . not to mention the huge kick China’s about to add. . . . Also, the World Nuclear Association estimates that it takes eight years for a new mine to

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go “online” and produce processing-ready uranium. That’s right, eight years. Right now, existing facilities can’t mine uranium fast enough to

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keep up with demand. It’s a supply gap squeeze, the likes of which have never been seen in peacetime for any commodity.

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II How Uranium Is Generating Huge Returns . . . Now and in the Future . . .

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The fact is, the price of uranium oxide, the cheap raw material used to create clean electricity, has nearly quadrupled. For 10 years, from September 1993 until September 2003, the price of uranium oxide actually decreased, from $10.20 a pound to $10.10 a pound. Then, in 36 months, the price shot up 435 percent, to $54 per pound. At current prices, ounce-for-ounce, this commodity is already 240 times more valuable than oil. It’s 1,687 times more valuable than coal . . . and hundreds of times more valuable than aluminum . . . or lumber . . . or concrete . . . or any other type of commodity that China is devouring to build its infrastructure. In a few short months, uranium has become one of the most sought-after commodities since the Romans minted gold coins. Yet, for the savvy investor, the real money’s going to be made in China, and it’s going to be made on Profit Generator 1, a company that . . .

• Just spent $7.2 billion to lock up the largest uranium deposit in the world . . . • Has a direct shipping line into Beijing harbor, no less . . . • And is about to have every ounce of its precious fuel spoken for by the Chinese government, through an exclusive trade deal. It’s a company that’s about to see its bottom line fatten by an estimated $100 billion or more . . . the kind of profits that can bring a lifetime of wealth to the investor who knows how to follow the money trail . . .

The “Law of Leverage” and Expanding Returns . . . When it comes to commodities like uranium, the “law of leverage” applies in spades. Astute

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analysts and traders will tell you, “As the commodity moves, so jumps the underlying stock.” Commodity prices have significant leverage power on stocks. Here’s why: The cost to produce a commodity doesn’t change, but as the price spikes, each ounce becomes exponentially profitable—and companies line their pockets with profits for shareholders. Consider gold, for example. . . . From March 2003 to today, the price of gold popped 70 percent, yet Miramar Mining popped 200 percent . . . and Tan Range Exploration jumped a whopping 650 percent in the same time frame. Now look at oil. . . . From January 2003 to today, oil prices jumped 100 percent. Yet, industry leader Sunoco climbed 545 percent . . . and at the same time, Valero Energy, the giant U.S. producer, rocketed 645 percent. And just look at what happened with aluminum, as China increased imports to manufacture refrigerators and engine blocks: The price per pound climbed 70 percent from January 2002 to today. Yet, Empire Resources in Fort Lee, New Jersey shot up 1,257 percent, making it one of the fastest-growing stocks in the United States. It leveraged out to nearly 17.9 times the gain of the underlying commodity. Investors got filthy rich. Right now, uranium’s on a tear—it’s creating the largest worldwide shortage of any commodity. Frankly, no analyst can know anything for sure in investing . . . or exactly how high the price of uranium will climb. Or whether the leverage factor will run 6, 8, 11 times or higher. . . . What we can say is that the shortage is getting worse, with no way to turn on the supply spigot. Power companies are hoarding

uranium. China’s doubling the world’s nuclear output. Uranium prices are climbing at a rapid rate. Even at modest estimates, returns on the right companies are likely to run 2,800 percent to 1,224.8 percent in the coming months.

Profit Generator 1: The Company That Owns the World’s Largest Uranium Mine According to CNN, 40 percent of the world’s available uranium ore lies in Australia. The country owns the mother lode of this precious commodity, more than twice as much as its nearest competitor, Kazakhstan. Yet, there are only three operating uranium mines in Australia, plowing 40 percent of the world’s raw uranium out of the ground. But as of August 2005, only one company owns the world’s largest mine, with “proven and probable reserves” of 391,000 metric tonnes of uranium ore, according to Australian government geologists. The mine is called the Olympic Dam, and it contains nearly 13 times the recoverable ore of any uranium deposit in the world. The company sitting on this mother lode of uranium, and positioned to capitalize on China’s exploding need for it, is BHP Billiton (NYSE: BHP). BHP is the world’s largest “diversified resources company,” headquartered in Australia. The company has roughly 37,000 employees in 100 different operations, nested in approximately 25 countries. This company also has:

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Profit Generator 1: The Company That Owns the World’s Largest Uranium Mine

• The most expertise in digging resources from the ground than perhaps any other company, with copper, silver, zinc, nickel, metallurgical ore, manganese, and even diamond operations on almost every continent; aluminum smelting operations in Mozambique; oil rigs in the Gulf; and even natural gas plants in Australia. This is one company that knows how to extract precious commodities. • It’s flush with cash. . . . In fact, available cash currently exceeds $1.5 billion. Its recent fiscal-year profits skyrocketed to U.S.$6.4 billion—up almost 100 percent from U.S.$3.5 billion in 2004, only one year earlier. • It’s so flush with cash that in August 2005, the company completed a capital return to its shareholders of $2 billion . . . a tidy dividend that’s likely to expand in coming years. • It already exports more than $3 billion worth of these commodities to China. In fact, its ties with China are so strong that it held its board-of-directors’ meeting this past June right in Beijing, to include Chinese officials. This company is overflowing with cash . . . sitting on the largest uranium deposit in the world . . . with the best expertise in mining and commodity exportation of all competitors . . . and with an established export business with China, to boot. There’s rarely been a company positioned to bulge with windfall profits like this one. But more importantly, the proof is in the money. Simply put: This company just made the biggest investment in uranium ever made . . . $7.2 bil-

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lion to buy up the largest uranium deposit in the world.

A Company That Put Its Money Where Its Mouth Is In August 2005, BHP paid $7.2 billion to buy the Olympic Dam uranium mine—the largest uranium deposit in the world. It’s also the largest stake in uranium ever put down by one public company. The reason is simple: BHP spent $7.2 billion on the Olympic Dam—its executives are pretty certain that the investment’s about to pay off handsomely. . . . The price tag alone is a remarkable act of confidence. The Olympic Dam is one of three active uranium mines in Australia, along with the Beverly and Ranger mines. But what BHP paid for the Olympic Dam is what some analysts called a “premium” for the acquisition . . . after all, the recent rise in uranium prices pushed the acquisition price up. . . . But what analysts didn’t realize—and what the company already knew—was this: • Demand hasn’t even begun to take off. And the recent rise in uranium prices is no fluke, especially when you consider these two statements from the Hon. Alexander Downer, Australia’s Minister for Foreign Affairs, who’s been negotiating trade deals with China since March 1996: —China imports about 1,200 tonnes of uranium a year, believed to be mainly from Russia and Kazakhstan. But China will need two million metric tonnes (roughly 44 million pounds) of

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uranium a year to power its growing number of reactors. —China will demand, on an annual basis, the same amount of uranium that Australia produces each year. Professor Zheng of the China National Nuclear Corporation, says, “we need to rely on uranium imports from abroad. . . . Australia is the richest uranium country in the world.”

A Trade Deal That “Guarantees” a Monopoly on Uranium The headline dated September 4, 2006 reads, “Australia could begin uranium exports to China within months . . .” (“China uranium sales ‘may start in months,’ ” The Australian Associated Press). And, the Australian government also said, “In principle, we could have uranium going into China in the first half of next year . . .” What you have to know is that BHP is about to get a near monopoly on exporting uranium to China through a deal with the Australian government. It’s a free trade agreement that all but guarantees every ounce of this company’s uranium is exported directly to China. The deal is estimated to account for the largest annual sales of uranium in the world. Here are the facts to consider: • August 9, 2005: The Australian Minister of Foreign Affairs announces the negotiation of a uranium agreement with China. • August 11, 2005: Mr. Jerry Grandy, president and CEO of the largest uranium

and nuclear reactor builder in Canada, meets with the Australian House of Representatives to explain the details of selling large quantities of uranium to China. • September 1, 2005: Foreign Affairs Minister Alexander Downer gives a speech in the Barossa Valley lobbying for greater uranium exportation to China. “China’s uranium should come from Australia, rather than other suppliers . . .” he says. • September 24, 2005: Resource Minister Ian Macfarlane is quoted in the Aussie newspaper, The Age: “The demand is there, the opportunity is there, the price has trebled. We are absolutely looking at increasing our exports [to China].” • April 3, 2006: Australia and China announce a signed nuclear-safeguards treaty that adds one more link to the uranium supply chain pending between the two countries. This treaty is a major development for both countries, and keeps the ball rolling for Australia to sell uranium to China in the near future. The momentum is moving—and quickly. And China’s knocking down one trade deal after another. . . . Australian uranium is the next in line.

Why the Aussies Have to Deal with China . . . and Make You Fast Gains Australia’s foreign debt is mounting. Right now, it’s sitting on U.S.$22 billion in debt . . . and growing. It’s the biggest buildup of debt in Aussie history, and the crushing effects on its

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economy and currency are starting to show. . . . The government must already pay a whopping 5.35 percent average on its bonds just to attract investors (U.S. Treasuries have averaged 1.81 percent). The strain is even beginning to crack its currency. Now consider this: The Aussie government’s recent study shows that exports of uranium to China will generate U.S.$24.4 billion to the Aussie government alone, not only wiping out all the foreign debt Australia owes, but generating the biggest cash infusion the country has ever seen. For Australia, it’s an economic miracle. . . . Right now, the full-court pressure is on, from Alexander Downer and the majority of Parliament, to save the Australian economy.

The World Leader in Exports to China Is about to Get Even Bigger The “Billiton” half of BHP Billiton goes back as far as 1860, while BHP was established in 1865. Both companies spent more than a century developing mining businesses before merging in March of 2001. Consequently, the marriage gave birth to one of the most competitive commodity mining companies the world has ever seen. In 2005, BHP earned $6.5 billion, with more than $1.6 billion in cash in its coffers. And trading at a forward P/E of 11, the company is a strapping value, especially when you reflect on the fact that the P/E for the S&P 500 is 22. Given BHP’s size, its forward P/E is even more comforting, considering the industry average is 21. Even more exciting, BHP Billiton is also the second-largest commodities company in the entire world, mining steel, aluminum, copper, iron, nickel, titanium, diamonds, and gold. The

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company is also diversified in oil and natural gas. And the company gives back to its shareholders, as well. In 2005, the company paid an annual dividend of 56 cents, equating to a 1.7 percent dividend yield. But recently, the company declared a 37-cent interim dividend, reflecting a 94.7 percent increase in the last two years. The dividend was paid on September 27, to shareholders on record as of September 8. In late August, the company reported earnings for the fiscal year to June 30—and you’re going to be shocked by the results. The company witnessed a 63.4 percent surge in profits, while also seeing revenue grow at nearly 25.5 percent. This company is far from just song and dance. The stock has outperformed the S&P 500 by almost 500 percent over the last five years alone. With this in mind, it’s easy to understand why funds like the Fidelity Contrafund, which is a large holder in the stock. Right now, the global demand for uranium will only grow in the months ahead. BHP is well-positioned to capitalize on the biggest supply gap of any commodity in peacetime. It’s why the Wall Street Journal says that BHP is about to be “in same league as Microsoft Corporation,” which turned every $10,000 invested at the onset into more than $6.1 million. Figure 2.1 shows you just how, if you put $10,000 behind BHP at the start of 2000, you would have already seen your investment grow to over $38,000 . . . at 280 percent increase. And, this doesn’t even consider the compounding effect of reinvested dividends. And the company is trying to return even more value to shareholders, as well. BHP recently announced that it would extend the onmarket share buyback program through September of 2007. BHP has authorized the

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Figure 2.1 BHP’S 280 Percent Move

purchase of up to 349 million shares of its own stock, totaling over $3 billion. Through dividends and share buy-backs, BHP has returned more than $11 billion to its shareholders since June of 2001. When the company is interested in buying its own stock, we should be also.

well as updates regarding this specific recommendation, exclusive to those who have purchased this report. Visit www.investmentu .com/uranium to receive this important information.

Action to Take

Profit Generator 2: The “Other” Australian Uranium Play

Buy shares of BHP Billiton (NYSE: BHP) at market, as long as the price of uranium is below $80. And use a 25 percent trailing stop to protect your principal and your profits. (See pages 26–28 for trailing stop information.) We’ve created a special web site which displays up-to-the-minute uranium spot prices, as

At full production, there’s one company that supplies 8 percent of the world’s uranium, is the majority owner in an active mine in Australia, and will sell Australian uranium to China: Rio Tinto plc (NYSE: RTP).

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Profit Generator 2: The “Other ” Australian Uranium Play

As we’ve already mentioned, Australia has three active uranium mines: The Beverly, Ranger and the Olympic Dam. While BHP Billiton’s mine, the Olympic Dam, is the world’s largest uranium deposit, the Ranger Mine has produced more uranium than any other mine in Australia since 1995. In 2005, alone, the Ranger mine produced 5,544 tonnes of uranium, while the Olympic Dam put out 4,356 tonnes. Rio Tinto owns 68 percent of the Ranger Mine. According to the Uranium Information Center, the Ranger mine has just under 10 million tonnes of uranium ore, which still needs to be mined. The company also owns 100 percent of Canning Resources, which is the sole owner of prospective Australian uranium deposits the Kintyre Project and the Westmoreland Project. However, because of Labor Party rules in Australia, the aforementioned two projects have yet to come online as “active” mines. And, Rio Tinto’s uranium holdings are quite extensive outside of Australia, too. The company owns just under 70 percent of the Rossing uranium mine in Namibia, Africa. The Rossing mine is the world’s longest running open pit mine. And Rio Tinto is already selling uranium to China from the Rossing mine in Africa. What this indicates is that once Australia is able to export uranium to China, Rio Tinto will already have experienced relationships in place with the Asian country. While Rio Tinto only sold a small portion of the 3,037 tonnes produced by the Rossing mine to China in 2004, it was a healthy start to what could turn into a massively profitable relationship. Through a recent proposal, the mine will have $112 million invested into rehabilitation of

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the mine, extending its life out through 2016. The mine is expected to produce 4,000 tonnes of uranium per year after 2007. At the current market price of $54 per pound, gross revenue (excluding costs in converting the ore into U308) would top $475 million per year! Also in Africa, Rio Tinto owns almost 50 percent of the Palabora Mining Co., Ltd., further diversifying its uranium portfolio. Rio Tinto and its subsidiaries also use advanced technology such as 3-D seismic, deep water, and high angle drilling—which “permit most deposits to be imaged with some precision.” The aforementioned technology and diversified mining portfolio are the primary catalysts behind Rio Tinto Energy Group’s 15 percent contribution to total earnings. In a nutshell, uranium and other energy sources are big earners for the company, especially with the price of uranium oxide currently topping $50 per pound.

Rio Tinto’s Rock-Solid Fundamentals Lead to Record Profits Fundamentally, the company is attractive to income investors with a 1.83 percent forward dividend yield rate—equating to $3.34 a share. Keep in mind though; the stock isn’t exactly cheap, trading at around $185 per share. However, on a percentage basis, the dividend yield certainly is appealing. On a key ratio basis, Rio Tinto trades with a P/E of 9 and has a massive market cap of $48 billion. And the company is sitting on $1.14 billion in cash—with a debt to equity ratio of .025. Basically, what these numbers are saying is that the company has plenty of cash to cover shortand long-term obligations, and is attractively valued, relative to earnings.

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And earnings are through the roof. For the quarter ended June 30, the company reported a blowout 75 percent increase in net profits, working out to $300 million more than Wall Street had anticipated. The company has a five-year net profit margin of 20 percent, while its broader industry is clocking in at 11 percent. And, the company is optimistic about its future with strong demand for uranium continuing over the next few years. The company recently said, “Given that there are limits to the expansion of mined supplies from existing sources and that generator demand is relatively unresponsive to price, firm prices can be expected to persist in 2006.” Putting its money where its mouth is, in March of 2006, Rio Tinto purchased more than 1 million shares of ordinary and treasury shares. Most companies don’t buy their own stock if they’re expecting the price to go down. With rising prices and sales surging forward—sales increased 61 percent in the last 12 months—Rio Tinto is a great addition to almost any portfolio.

Action to Take Buy shares of Rio Tinto plc. (NYSE: RTP) at market, as long as the price of uranium is below $80. And use a 25 percent trailing stop to protect your principal and your profits. (See pages 26–28 for trailing stop information.) We’ve created a special web site which displays up-to-the-minute uranium spot prices, as well as updates regarding this specific recommendation, exclusive to those who have purchased this report. Visit www.investmentu .com/uranium to receive this important information.

Profit Generator 3: A $29.7 Billion Uranium “Pure-Play” Up to this point, we’ve focused primarily on Australian companies positioning to sell uranium to China. However, there’s another uranium stock that will not only geographically diversify your uranium portfolio, but is the world’s leading uranium producer—providing almost 20 percent of the world’s demand. This company is the uranium “pure-play,” which is more closely tied to the price of uranium than our previous two investment ideas. The global supply leader we’re talking about is Cameco (NYSE: CCJ), a Canadian-based company that specializes primarily in uranium mining and sales. In fact, the company has 550 million pounds of proven and probable uranium reserves. Cameco is based in Saskatchewan, Canada, and is generally the controlling force behind all North American uranium mining. In addition, Cameco is also actively exploring for uranium deposits in Australia—working closely with the Japanese and French governments to develop mines for uranium exportation. The actual corporation “Cameco” stemmed from the mega merger of Eldorado Nuclear and the Canadian government. At present, Cameco owns four major uranium mines and deposits in Canada: • McArthur River—Saskatchewan, Canada: High-grade uranium mine—the world’s largest—producing just under 19 million pounds of uranium annually. • Cigar Lake—Saskatchewan, Canada: High-grade uranium deposit—the world’s second largest, with more than 232 mil-

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Profit Generator 3: A $29.7 Billion Uranium “Pure-Play”

lion pounds of proven and probable reserves of uranium oxide. The mine is undeveloped, but production is expected to begin in 2007. • Key Lake—Saskatchewan, Canada: High-grade milling—the world’s largest operation of this type. In addition, the Key Lake project produces 18 million pounds of uranium oxide annually. • Rabbit Lake—Saskatchewan, Canada: Second-largest uranium milling operation in the world, with a capacity of 12 million pounds annually. In 2005, Rabbit Lake produced 6 million pounds of uranium oxide. In addition to its Canadian operations, the company also owns 100 percent of the Crow Butte mine in Nebraska, with an annual production capacity of 1 million pounds. In 2005, the mine produced 0.8 million pounds. In Wyoming, the company owns 100 percent of the Smith-Ranch Highland mine, which is the “largest operating uranium production facility” in the United States. It has more than 16 million pounds of probable and proven reserves, and produced 1.3 million pounds of uranium in 2005. The Smith-Ranch Highland mine was owned by Power Resources, Inc.—the United States’ largest uranium producer. However, Cameco purchased the company in 1996, further solidifying it as the world’s uranium leader. Last but not least on the list of the company’s property holdings, Cameco owns 60 percent of the Inkai mine in Kazakhstan, which has reserves of 114 million pounds of uranium oxide. And the mine is currently testing mining operation at the site to produce even more uranium.

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The mine is expected to produce 800,000 pounds of uranium in 2006. Aside from uranium mining, the company also recycles the resource—“remilling” uranium-bearing products. In fact, the company said it could (with pending approval) produce 18 million pounds of uranium from recycled sources. Diving into the company’s financials, Cameco is sitting on just over $900 million in cash, and operates with an extremely healthy current ratio of 2.84—meaning if the sky collapsed tomorrow, the company could pay its bills more than two times over before breaking a sweat. Full-year revenue for 2005 came in at $1.3 billion, a 25 percent surge over 2004. And net earnings also made a large move toward greater profitability, with a 22 percent increase over the previous year. In addition, the company split the stock 2 for 1 as recently as February 17. While Cameco does own electricity-generation and gold subsidiaries, it is mostly focused on the production and development of uranium. As a result, the company’s stock price is more closely tied to the price of uranium than BHP Billiton and Rio Tinto, and could easily see large gains, should the price of uranium continue to climb upward. Cameco is a great addition to any uranium portfolio that has BHP Billiton and Rio Tinto, as the trifecta creates geographical, and business-model diversification. What we mean is that by owning the three stocks, your portfolio will have uranium interests in Australia, Africa, Asia, and North America. In addition, each company operates slightly differently, and owns separate commodity subsidiaries . . . for example, owning BHP Billiton

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would add additional commodity diversification to your portfolio, but owning Cameco would make your portfolio more sensitive to the spot price of uranium. However, owning the two together creates a diversified uranium and commodity position.

Action to Take Buy shares of Cameco (NYSE: CCJ) at market, as long as the price of uranium is below $80. And use a 25 percent trailing stop to protect your principal and your profits. (See pages 26–28 for trailing stop information.) We’ve created a special web site which displays up-to-the-minute uranium spot prices, as well as updates regarding this specific recommendation, exclusive to those who have purchased this report. Visit www.investmentu.com /uranium to receive this important information.

Profit Generator 4: An Act of Congress That Could Lead to Windfall Profits Under the Energy Policy Act of 1992, the company I’m going to tell you about was formed as a wholly owned U.S. government—for profit— corporation. And it wasn’t just starting its own little uranium business; this company was formed to take over the entire U.S. government’s uranium enrichment activities. The company I’m talking about is USEC, Inc. (United States Enrichment Corporation) (NYSE: USU). The shares started trading on the New York Stock Exchange July 23, 1998 at a paltry $7 and

change. In recent years, the nearly doubled, but then fell down to around $9 per share. The company hit some stumbling blocks in one of their developments . . . but the occurrence is painting an amazing opportunity for investors who get in now. In fact, as you’re about to see, the stock has an expected fair value 53 percent to 84 percent higher than where the stock is trading now. This company is in a very favorable place in the uranium supply chain, and many Wall Street professionals agree. It’s fairly rare that you find a stock that is 69 percent owned by institutional holders and mutual finds. . . . Recent weakness shook out weaker individual investors, but the major players are hanging on, because they know the stock is going higher. See, USEC is right in the middle of the world’s uranium supply chain, and is propped up with guaranteed revenues from the government . . . a whopping 20-year, $8 billion exclusive contract with the United States. USEC also has no competitors, and the company’s success is almost guaranteed by Uncle Sam. In fact: This company is the world’s leading supplier of enriched uranium for commercial nuclear power plants. And, it’s completely out of sight on Wall Street, trading right now for one-fourth the price of leading uranium producers. It’s the only company of its kind that owns an enrichment plant in North America. In fact, the demand is now so high from power plants outside of the United States and Russia that the company is constructing an additional plant—the “most efficient enrichment plant in the world.” But don’t wait on this one . . . trading at just one-quarter the value of less profitable companies—with an almost insurmountable economic moat and a near monopoly on its

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business—this isn’t going to stay under the radar for long. Wall Street already sees the fundamentals on this one, as witnessed in the company’s enormous institutional following. And given the low price-to-book and price-to-sales ratios, the stock is set to pop “like a champagne cork on New Year’s Eve.” Beyond the “value gap pop,” the company has a unique market position as the middleman between the world’s existing supplies of un-enriched uranium, and the countries that are desperate to snap up every last ounce of it.

A Secret “Profit Weapon”— Undervalued by Wall Street Before uranium can be used in nuclear reactors, it must first be “enriched” after coming out of the ground. When uranium is mined, it is turned into U3O8, otherwise known as uranium oxide. However, the uranium oxide must then be converted into a more powerful fuel for nuclear reactors. Uranium must be “enriched” with the more potent part of the radioactive materials that comes from the original ore. And with the massive cost of building enrichment plants, not many companies can do it themselves. Thus, there’s an urgent need for a well-capitalized “middleman” who does nothing but produce fuel for reactors from raw uranium. USEC got off to a running start when it was given the U.S. government’s two uranium enrichment plants, Paducah in Kentucky and Portsmouth in Ohio. And to help the company get off the ground, the U.S. Department of Energy retained “responsibility for environmental restoration and

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waste management activities resulting from its operations at the site.” Shortly after, USEC contracted with what is now Lockheed Martin Corp. for operation and maintenance of both plants. Then, after five successful years of uranium enrichment, USEC was privatized in 1998 as USEC, Inc., and listed on the New York Stock Exchange. But USEC is adding a new plant to its operations that could give it the most advanced uranium-processing facility in the entire world. The new arm of the company is being called American Centrifuge, and it’s based in Piketon, Ohio. American Centrifuge’s operations will be grounded in advanced, proprietary technologies developed by USEC’s government partners at the Department of Energy, but with “expected improvements in efficiency through the use of state-of-the-art materials, control systems and manufacturing processes,” according to USEC documents. As USEC’s CEO recently said regarding this new facility: “With dozens of new nuclear power plants being planned around the world, our customers are counting on a reliable supply of enriched uranium. We are building a plant that will provide that supply for decades to come . . .” Up until February of 2006, the company had a dividend yield of 3.7 percent, with a five-year average of 5.9 percent. In comparison, ExxonMobil pays a small 2.1 percent yield. However, the board of directors recently voted to discontinue the dividend payment in order to reduce the level of external financing required for its American Centrifuge Plant. The actual plant will be developed from 2007 to 2011. It’s important to note the company will not pay a dividend until this project is complete;

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thus, this investment is about growth, not income. But here’s the kicker: In USEC’s secondquarter 2006 earnings report, the company mentioned that it would delay the full build out of the lead cascade until the second quarter of 2007 . . . primarily because the company will not be able to raise additional cash required for the build out until 2007. While this might sound like bad news, it’s really an incredible opportunity for investors, as the stock is now trading at levels below the “salvage” value of the company. In fact, the company’s assets are currently worth around $15 to $18 per share, implying that as of September of 2006, the stock was trading at a 50 to 60 percent discount to fair market value. This is the perfect storm of disappointing news that drives a stock down to a level where major institutional investors will begin taking notice . . . and buying. And, to add icing on the cake, the company is currently expensing the American Centrifuge Plant spending, rather than the “typical” Wall Street way of capitalizing the costs. This has driven down earnings estimates for 2006, but in the end will prove to be a great asset for shareholders. And there’s even more to the story. Just as uranium prices are trading at 52-week highs, so are enrichment prices, known as Seperative Work Unit (SWU). SWUs are units of measurement used in nuclear power generation. Think of SWUs like calories are to food. The thing to know though is that the SWU price (which is where USEC makes money), is at an all-time high. See Figure 2.2. In 2006, alone, the SWU price is up 12 percent, and even more impressive, the fuel price is up 20 percent in the last three years.

While the SWU price gains might not sound as grandiose as the price of U3O8, there’s something important to read between the lines here. The SWU price moves slower, but is also slightly more stable . . . which means USEC can count on income in the future.

Destroying 10,467 Warheads . . . Booking Huge Profits By investing in USEC, you are literally helping to secure America from the threat of rogue nations or terrorists getting hold of nuclear weapons. Through a unique partnership between the U.S. government and Russia’s nuclear industry, called “Megatons to Megawatts,” USEC is taking bomb-grade uranium from dismantled Russian nuclear warheads and recycling it into fuel for use by American power plants. In all, the program has already eliminated 10,467 nuclear warheads—and USEC is making money reselling the enriched uranium to U.S. utility companies, as you might imagine. The nuclear warheads are first dismantled in Russia and the Highly Enriched Uranium (HEU) is removed. The HEU warheads are converted into HEU oxide, which is then made into Highly Enriched Uranium Hexafluoride (UF6). The UF6 is then diluted into the fissionable 235 isotopes, or Low Enriched Uranium (LEU), which is then shipped to USEC in the United States. USEC examines the LEU and then sends the material out to major corporations like Westinghouse, Framatone or Global Nuclear Fuels— which then create the actual fuel assemblies for nuclear reactors. Domestically, the United States has more than 100 nuclear reactors supplying more than

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Figure 2.2 Rise in SWU Prices

20 percent of the nation’s electricity. And this business alone is enough to fuel USEC’s profits for decades to come.

Plus, Great Fundamentals On top of its strategic positioning and the current state of the uranium market, USEC’s fundamentals are also encouraging. Again, USEC trades at an amazingly low price-to-sales ratio of 0.47, and at just under 0.9 times book. The company also brings in a ton of cash; annual revenue for 2005 clocked in at almost $1.8 billion, with expected 2006 net income to clock in at between $60 to $70 million.

And there’s no shortage of business either. . . . When you consider USEC captures just under 30 percent of the world’s uraniumenrichment business, it becomes overwhelmingly apparent that this company was built by the U.S. government to keep a controlling arm over the world’s uranium. Last, through ALL of 2006, company insider buying totaled 231,139 shares, at an average price of $11.89. The insiders have bought $2,748,242 worth of stock over the last year . . . not chump change by any means. This one fact alone gives us strong guidance that the stock will hold current levels, and fire higher in the years to come. Now that the world has begun gorging itself on existing supplies, it is increasingly turning to

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one company for the enriched uranium it needs. That company will certainly enrich the portfolios of investors who get in right now.

Action to Take Buy shares of USEC, Inc. (NYSE: USU) at market, as long as the price of uranium is below $80. And use a 25 percent trailing stop to protect your principal and your profits. (See below for trailing stop information.) We’ve created a special web site which displays up-to-the-minute uranium spot prices, as well as updates regarding this specific recommendation, exclusive to those who have purchased this report. Visit www.investmentu.com /uranium to receive this important information.

Our Secret to Success: The Investment U Philosophy Our philosophy of investing is this: You can’t go too far wrong if you get the big questions right. The big questions are not, “when will the economy recover?” or, “where will the market go next?” True, these are the questions that most investors obsess over. But it’s a waste of your time. The big questions—the important ones that you can take action on—are these: 1. How can I get the highest return with the least amount of risk? 2. How can I protect both profits and principal? 3. What can I do to GUARANTEE my investment portfolio will be worth more in the future?

Here are three fundamental and key parts of the Investment U philosophy—a trailing stop strategy, asset allocation and position sizing— and how together they can make this year, and your future ones, very prosperous.

Limit Your Downside by Using a “Trailing Stop Strategy” At Investment U, we always look for the best and brightest stars to grow your portfolio, and we employ a secret weapon that is proven to get you the lion’s share of any move. When you buy a stock, you buy it with the intention to sell it for a profit some time in the future. In order to do so successfully, you should put as much thought into planning your exit strategy as you put into the research that motivates you to buy the investment in the first place. Our advice is to follow this simple plan: We ride our stocks as high as we can, but if they head for a crash, we have our exit strategy in place to protect us from damage. Though we have many levels of defense and many reasons we could sell a stock, if our reasons don’t appear before the crash, the Trailing Stop Strategy is our last-ditch measure to save our hard-earned dollars. And, as you’ll see, it works well. The main element to Investment U’s trailing stop strategy is a 25 percent rule. We will sell positions at 25 percent off their highs. For example, if we buy a stock at $50, and it rises to $100, when do we sell it? When it falls back to $75, or 25 percent off our high. If you limit your losses to 25 percent per investment, you at least have a fighting chance of getting that money back. If you allow larger drops, you’re going to be a loser over the long run. No doubt about it.

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Becoming a Top Trader . . . Psychologically Speaking. Investment U Advisory Panel member Dr. Van K. Tharp is “coach” to the world’s greatest investors and traders. These superstars come to Dr. Tharp (he has a threemonth waiting list according to USA Today) for stock market investment advice that will lift their profits to even higher levels. During the past 20 years, Dr. Tharp has accumulated psychological profiles on over 4,000 investors from all around the globe. To maintain current profile data, he has conducted many follow-up interviews with them. In ad-

If you do hold onto a falling stock too long, the loss will often be far more than just 25 percent. And all it takes is one big loss to set an investor back for years. Let’s say you start off with $10,000. A year later you’ve made 25 percent ($12,500). Same for next year ($15,625), and the next ($19,530). But then after three years of 25 percent annual gains, the fourth year, you take a loss of 50 percent. It puts you back below where you started, at $9,766. Now, let’s say you had a 25 percent trailing stop during the year you lost 50 percent. You would have been stopped out at $14,648. Then during the following three years (when you again profited by 25 percent each year), your holdings would be $28,600 at the end of that entire seven-year stretch.

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dition, he has conducted extensive, in-person interviews with many of the world’s best investors and traders. Two techniques were used by a full 99 percent of these investors. In other words, they disagreed on almost everything else—but a full 99 percent believed that these two techniques were essential to their success. One, of course, was to never ever lose big money in the stock market (a.k.a. using a trailing stop loss). To find out the other, visit http://www.investmentu.com/resources/investmentadvice.html.

However, if you didn’t have a 25 percent trailing stop in place, after the same seven-year period, you would only have $19,073, still below where you were prior to the 50 percent drop. Over the seven years of this example, you’d be up 186 percent. That’s an average return of over 26 percent per year, much better than you’d think. But pick your own example, and do the math. Look back at your own portfolio. You’ll see that cutting your losses is the key to both getting good overall returns and avoiding lost years. This is best illustrated by some specific examples—real recommendations made by Investment U. And fortunately, the tech run-up and subsequent meltdown provided substantial proof that limiting your downside gives you more capital to invest in your winners.

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Let’s begin with a look at Adobe, the innovative software company on the (then) booming Nasdaq. It zoomed up, with no sizable price correction, for 10 straight months. The stock kept achieving new all-time highs. Along the way we would have kept adjusting upward our 25 percent trailing stop. Given that we would have bought in at $31, we would have kept locking in higher and higher profits. When the technology and communications sectors finally began to correct, Adobe corrected along with them. But thanks to our 25 percent trailing stop, the worst-case result for our investment would have been a profit of over 81 percent (down 25 percent from it’s highest price). Several companies witnessed declines of as much as 90 percent, and the “buy-and-hold” crowd held all the way down. That’s what can happen when you hold a stock investment with no exit strategy. That kind of loss is hard to recover from. In reality, most investors who say they’re buying and holding will in fact panic in a bear market, especially a long grinding one. We saw it graphically in 2000 to 2002—the last bear market. Don’t let this happen to you: Use a smart exit strategy that lets you capture the majority of any profits—even a doomed one.

Position Sizing Is What the Pros Do That Novices Don’t For the world’s most successful investors, low risk means entering only into positions where the probability for high profits far exceeds the possibility of losses over the long run. They invest their money in such a way as to position themselves for maximum profits while—at the very same time—ensuring that

their exposure to serious loss is absolutely nonexistent. Position sizing is really all about money management. But it’s not the kind you use to make sure you have enough money on hand to pay expenses like the mortgage, household bills, college tuition for your children, car payments, and so on. The money management connected with position sizing is strictly limited to your investment portfolio. And it’s every bit as crucial to your profits as trailing stops and the stocks you choose. That’s because this management process tells you how much you should invest in your positions so that you’re not risking more than you’re comfortable with. Position sizing also helps you when you decide it’s time to add to your winning investments—a process we’ll discuss in a moment.

Investment Advice in the Form of a Marble Game At many of his seminars, Dr. Tharp illustrates the importance of position sizing by having the participants play an investment game using a bag of marbles. At the start of the marble game, participants are each given $100,000 in play money to seed their portfolio. There are 20 marbles in the bag, each one representing either a losing (black marble) or a winning (white marble) trade. There’s one more interesting variable: 60 percent of the marbles in the bag are winners while 40 percent are losers. And each marble is replaced after it is drawn. One of the winners is a “10 times winner,” and one of the losers is a “5 times loser.” The odds of winning in this marble game are far higher than the odds we face in the markets.

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Still, when Dr. Tharp conducts this game with his seminar audiences, more than two-thirds of the participants always lose money. And a full one-third goes bankrupt. How is that possible? How can a majority of people lose in a game in which the odds are so heavily in their favor? The answer is very simple: Those who lose money do so because they have no idea how much they should be investing in any one marble draw. They are playing the game without a “system,” so they’re really doing nothing but gambling. This sort of approach doesn’t win the marble game. And, in the real-world investment game, it won’t lead to long-term wealth. The key to success they’re missing in the marble game—and the strategy you should use in your portfolio—is position sizing.

Successful Investing Is Emotionless Investing Just as we saw when we were looking at trailing stops, investors in this marble game lose money because they get caught up in the emotions of investing. During his marble game, Dr. Tharp does just what’s needed to push all the “hot buttons” of his audience. . . . For example, after 10 pulls from the bag, he’ll ask to see the hands of all those whose playmoney portfolios have doubled in value. And a few hands always go up. Of course, when the others in the game—the vast majority—see that a few of their fellow participants have hit it big already, worry and envy enter the picture. And what do you think happens? In an attempt to catch up with the winners, the other participants start increasing their bets. Problem is, when these ill-considered bets turn out to be losers, they’re doomed to fail-

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ure—they dig themselves into a hole they can’t get out of. Now, we’ll show you how you could win in this marble game. It’s the same way you’ll win in the real-life investing game—the game that will determine the level of wealth you’re going to attain in this life. Here’s how you can pursue the very same low-risk ideas the world’s best investors go after. First of all, we’re assuming that you’ll be following our investment advice and always have 25 percent trailing stops on your investments. The 25 percent is our rule—you can choose your own percentage. The most important thing is that you use it consistently. Based on this assumption, for your investments to be low-risk, you should be dealing with odds of at least 2-to-1 or 3-to-1 in your favor, and that means you should be expecting returns of between 50 percent and 75 percent on your profitable investments. We arrive at those figures knowing that because you’ll never lose more than 25 percent on any one investment (you’ll be stopped out at a 25 percent loss), 50 percent and 75 percent gains represent, respectively, 2-to-1 and 3-to-1 odds. To give you another example, let’s say you invest in a stock that you expect to return only 30 percent rather than 50 percent or 75 percent. To keep your investment low risk (and your odds at 3-to-1), you’d have to change your trailing stop from 25 percent to 10 percent. Whatever your expected profits, here are two “golden rules” you should follow: 1. Know your worst-case scenario to keep from going bankrupt. 2. Determine how much you’re willing to lose in any one investment.

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Now we’ll see how you would apply these two golden rules to Dr. Tharp’s marble game in order to come out a winner. You’d first have to decide how much of your $100,000 you were willing to lose on any one marble pull. Now, because you’re adhering to Investment U’s 25 percent trailing stop rule that decision won’t be difficult for you—you know that 25 percent is the maximum you’re ever going to lose. So you would never want to put more than 5 percent of your money on any one marble—because if you were to pull that 5 times loser out of the bag, you’d hit your stop-loss limit (5 percent × 5 percent = 25 percent). You’d have to start with a bet of $5,000 (5 percent of $100,000). But what would you do next? Would you simply continue to bet $5,000 on every marble you pulled from the bag? Well, because the odds of this game are heavily stacked in your favor, that strategy would probably mean you’d end the game with more money than when you started. So it would be a good strategy—but it’s not the best you can do. To really optimize the profit on your investments—in the marble game or in real life—you should scale the size of your investments to the amount of total capital you have in your portfolio.

Always Know Exactly How Much to Invest in the Market for Maximum Profit and Comfort If in the marble game your portfolio had grown from the starting $100,000 to $200,000, and you want to stick with your 5 percent rule, then instead of investing $5,000 on your next investment, you’d go with $10,000. Your risk stays the

same (a $10,000 investment in a $200,000 portfolio is the same as a $5,000 investment in a $100,000 portfolio), but your potential for profit escalates because you have more money in play. Similarly, if you happen to start out with some losses, you only risk 5 percent of what remains in your portfolio. For your initial investment and for all subsequent investments, you should never take on a bigger risk than you’re comfortable with. And you should have a systematic way of investing that ensures that no matter how the size of your portfolio changes, you’ll continue to maintain that same risk level. The advice we give at Investment U includes a strong recommendation that you never have more than 2 percent of your capital at risk in any one position. But remember, that doesn’t mean that you can only invest 2 percent in any one position—it means you shouldn’t have more than 2 percent at risk. To illustrate this 2 percent rule, let’s look at a $100,000 portfolio. If you follow our rule for 25 percent trailing stops and 2 percent risk, the maximum you can invest in any one stock at any one time is $8,000. Here’s the formula for figuring that out: [(0.02 × 100,000)/0.25]. Now here it is “spelled out”: 0.02 times 100,000 = 2,000, divided by 0.25 = 8,000. If you decided you wanted to put less at risk— 1 percent of your capital—our formula would be [(0.01 × 100,000)/0.25] and your limit would be $4,000 in any one stock. The central message here is consistency: Decide on how much you want to risk, and then stick with that number no matter what. Stay with low-risk ideas, have a consistent exit strategy for the stock market, and you’ll begin to make money just like the world’s greatest investors.

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Stick to an Asset Allocation Model Successful investing begins by conceding that— to a degree—uncertainty will always be your companion. You can guess what the market is going to do and be right or you can guess and be wrong. Or you can let some self-styled “expert” do the guessing for you. But no one guesses right consistently, so we don’t waste time here. Instead, we follow an investment formula that won Dr. Harold Markowitz the Nobel Prize in finance in 1990. His paper promising “portfolio optimization through means variance analysis” demonstrates how you can maximize your profits and minimize your risk by properly asset allocating and rebalancing your portfolio. As far as nuts and bolts, the first step in asset allocation is dividing your portfolio into baskets, or asset classes. In today’s investment landscape, there are a multitude of them. They include: stocks, bonds, cash (not simply cash in your wallet or bank, but also highly liquid and secure short-term instruments such as T-Bills, money market funds and CDs) real estate and precious metals. Subclasses exist within these major asset classes. For instance, stocks aren’t exclusive to the Dow, S&P 500 and Nasdaq. Rather, stock classes range from large-caps, mid-caps, and small-caps, to growth stocks, value stocks, or emerging market stocks.

Diversification and Correlation . . . Limiting Assets That Behave the Same Diversification is a strategy that reduces portfolio volatility and exposure to risk by combining a variety of investments that are unlikely to

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move in the same direction in the same conditions. In other words, the asset classes in your portfolio should not be correlated. Instead, you want to take advantage of the fact that unrelated investments will behave differently at any given point in time. For instance, in 2005 while large-cap stocks (represented by the Dow Jones Industrial Average) returned − 0.61 percent, real estate investment trusts (REITs) (represented by the Dow Jones Equity REIT Total Return Index) rose 11.9 percent. A simple and good way to accomplish this is by owning stocks and bonds. An even better one is to use mutual funds because they are already diversified by virtue of owning sometimes hundreds of stocks in one fund. When you mix up your portfolio with funds among different asset classes, the chance that more than one will drop at the same time diminishes further. Odds are also very low that two or more mutual funds will hold the same stocks. And, if you use a no-load commission-free family or discount brokerage, mutual funds can be very costeffective. Ultimately, diversification reduces the upside and downside potential of your portfolio. As a result, you are protected against wild fluctuations and volatility, something most investors wish they had when global tensions mount or when the markets sell off, sometimes for no good reason. Asset allocation actually takes diversification and correlation a step further by considering the varying risks associated with each asset class. For example, stocks have produced historically higher-than-average annual returns and more volatility than other investments. Bonds, on the other hand, perform steadily over time. They may generate lower returns than stocks, but their prices fluctuate far less.

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Harry Markowitz’s strategy calls for a melting pot of investments for your portfolio, mixing high- and low-risk assets to create the perfect blend of risk versus reward for you, personally. For instance, a young aggressive investor wants and needs capital appreciation for growth. This person’s allocation might be 70 percent to 80 percent in stocks and the rest in bonds and/or cash. As this investor ages and looks to preserve wealth and reduce risk, he will need more dividend-producing holdings to generate income from his assets. It’s an easy shift: Allocate less to the riskier asset class of stocks and more to the lower risk classes of bonds and cash. The portfolio might have 80 percent in bonds and 20 percent in stocks or 0 percent in stocks and 20 percent in cash. Despite these guidelines, you are the only one who knows how much risk lets you sleep at night. Can you handle a 35 percent loss in a year or would you rather see a conservative growth rate of 10 percent and not be subject to higher losses? All we can do is arm you with the facts. Only you know how much risk you can stomach. Here are some historical rewards versus risk numbers: • Safe portfolio—20 percent stocks, 80 percent bonds —Throughout history, this portfolio has averaged 7.0 percent a year. —Its WORST year was a loss of 10.1 percent. —It lost money 17 percent of the years. • Balanced portfolio—50 percent stocks, 50 percent bonds —Throughout history, this portfolio has averaged 8.7 percent a year.

—Its WORST year was a loss of 22.5 percent. —It lost money 22 percent of the years. • Risky portfolio—80 percent stocks, 20 percent bonds —Throughout history, this portfolio has averaged 10.0 percent a year. —Its WORST year was a loss of 34.9 percent. —It lost money 28 percent of the years.

The Rebalancing Act: “Buy and Hold” Is Not an Investment Strategy After using asset allocation to divide investments across different asset classes, there is one more critical component to understand—it’s the 15 minutes of work you’ll have to do annually, and it’s known as “rebalancing.” Many investors did well during the roaring bull market of the 1990s. But the thundering herd turned into cliff-diving lemmings when the market downdraft started in earnest six years ago. Why didn’t these investors sell? In many cases, it was because their money managers or mutual fund companies peddled the idea that you should buy and sit tight. Not a bad marketing idea if you run a mutual fund company with millions of dollars in management fees and other expenses rolling in annually from shareholders. But let’s face facts. Any successful investment strategy includes a sell discipline. Otherwise, you’re just acting on blind faith. Faith that often turns out to be unjustified. But the decision to sell is complicated because history has shown that it is impossible to predict which asset class will be the best or the worst in any given year.

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If you look specifically at 1999, Long-Term Government Bonds were the worst performing asset class of the group at -9.0 percent. The very next year, though, they led all asset classes with returns of 21.5 percent. Or take the example of Small-Cap Stocks. In 2002, they posted negative returns (–13.3 percent). In 2003, they rose to the top, up 45.4 percent. Since no one can predict the market leaders and underperformers, you must stay in the market over time to reach your financial goals. And you must remain allocated across a broad group of asset classes. That’s why a proper asset allocation also involves the strategy of rebalancing. Rebalancing is a tool to help you maintain your target allocation by selling a portion of an appreciated asset and investing the proceeds into an underweighted asset class to restore your original asset allocation. To understand this, consider that the following asset classes—stocks, bonds, precious metals, and so on—represent a specific percentage of your total portfolio. But as each year goes by, those percentages change depending on the performance of the financial markets. Bonds may be higher, and stocks may be lower. Inflation-adjusted Treasuries may have appreciated, and gold mining shares may have fallen. And so on. The job of rebalancing is to bring those percentages back to your original alignment. Let’s walk through an example to show you the ease and importance of rebalancing. For this example, let’s use an asset allocation that is 30 percent U.S. stocks, 10 percent international stocks, 50 percent U.S. bonds and 10 percent cash. Let’s assume at the end of the year the portfolio value is $140,000. U.S. stocks performed

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strongly, international stocks struggled, and U.S. bonds and cash were relatively stable. To rebalance this portfolio, $7,000 of U.S. stocks and $2,800 of U.S. bonds would have to be sold to reallocate $9,800 to international stocks, thereby returning the portfolio to its original asset allocation percentages. Instead of ascribing to the “buy-and-hold” philosophy, asset allocation forces you to sell investments on an annual basis. Logic might tell you to sell your worst-performers. Not so. You actually sell the top-performers and reallocate to the lowest performers. It doesn’t just hope to “buy low and sell high.” It forces you to actually do it. If you didn’t rebalance, you would be buying more of an appreciated asset in the hope that you will be able to sell it at an even higher price in the future. Remember that it is impossible to predict which asset class will be the best- or worstperforming in any given year. So although international stocks may have underperformed in the previous year, there is no way of being certain that they won’t be one of the top performers the following year. Rebalancing your portfolio ensures your investments are always properly allocated to take advantage of these year-to-year changes. When markets are performing poorly, your rebalanced portfolio will experience less negative returns than a “nonrebalanced” portfolio, which translates into greater portfolio value during such times. And when the markets turn, you’ll have more money to take advantage of the upswing than you would if you didn’t rebalance.

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Author Biographies

Alexander Green is Investment Director of The Oxford Club. A Wall Street veteran, he has more than 20 years’ experience as a research analyst, investment advisor, and professional portfolio manager. Mr. Green has been featured on “The O’Reilly Factor,” profiled by Forbes and Marketwatch.com, and has written for Louis Rukeyser and several other leading financial publishers. He currently writes and directs The Oxford Club’s Communiqué, the Oxford Insight and More Green Stuff e-letters, and three elite trading services: The Momentum Alert, The Insider Alert and The International Trader Alert. He also coedits The Oxford Short Alert with Louis Bass. Alex is a top-rated speaker at financial conferences throughout the world. Horacio Márquez is editor of the Money Map Advantage, and has more than 20 years of experience in global finance activities on Wall Street, in major U.S. fund management companies and independently.

Mr. Márquez was Head of Emerging Markets Research for Merrill Lynch Asset Management’s fixed-income funds; Director and Head of Economic and Financial Research—Latin America for Swiss Bank and Head of Credit and Research for ADP Capital Management. In these capacities, while managing billions of dollars, he correctly foresaw and took very large advantage of the Argentine fiscal crisis of 1994, the Mexican maxi-devaluation later that year, the Asian crisis of 1997, and the Russian crisis of 1998. He got out of Enron, WorldCom, and many others without losses well before they defaulted and foresaw the ensuing U.S. recession and recovery. Mr. Márquez has also worked independently in M&A, in venture capital and in debt financing in Latin America and in the United States. He holds an MS in Industrial Administration from Carnegie-Mellon’s Tepper Business School. Louis Bass is the editor of the Hot IPO Trader, an alert service uncovering the hottest and most

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potentially profitable IPOs. He’s also the editor of the Takeover Trader alert service, targeting takeover candidates poised for triple-digit gains. As an advisory panelist for The Oxford Club, Lou is also the co-editor of the Oxford Hedge Trader and is a regular contributor to the Club’s twice-monthly Communiqué. Lou spent years with one of the country’s leading investment and brokerage firms as a top analyst and trading expert, specializing in corporate takeovers and IPOs that led to large profit opportunities for investors. Mark Whistler writes and conducts research for The Oxford Club and Mt. Vernon Research and is

the author of the recently released book Trading Pairs (published by John Wiley & Sons, Inc., 2004), and is one of two creators of PairsTrader.com. Mark is presently working on his second book on market psychology for Wiley, expected to be on shelves toward the end of 2006. Mark writes a regular column for Traderdaily.com in New York and also writes for Investopedia.com in Canada, for whom he recently finished a Series 63 study guide. A few of his other writing credentials include: The Motley Fool, Active Trader Magazine, BullMarket.com, OptionInvestor.com, and WorkingMoney Online.

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Here’s How to Get Updates on Every Recommendation in This Report . . .

The companies in this report offer tremendous upside. And while their outlook is favorable for the long run, it’s critical you have access to upto-the-minute, material information regarding these recommendations. We’ve set up a web site that gives you current information and will report any significant developments. It is exclusive to those who have purchased this report. Visit www.investmentu.com/uranium to confirm your purchase, and we will immediately deliver the company updates via e-mail. Your confirmation will also provide you with unlimited and free access to all of Investment U’s current market research—26 investor reports, including: u A “New” Stock Play on Alternative Energy—Why Now Is the Time to Invest in Ethanol u Knowing When Stocks Are Set to Soar—How to Uncover Momentum Plays

That Can Turn $10,000 into $1 Million or More u Unearthing Profitable Opportunities in the Red-Hot Copper Market In addition, through the Investment U ELetter, you’ll also get current market coverage from Dr. Mark Skousen, Chairman of Investment U, author of more than 20 financial books and former columnist for Forbes magazine. Your express access includes U.S. and foreign stock market advice, precious metals reports, how to invest in overseas real estate markets . . . even how to invest in gold coins. In all, there are more than 500 articles.

Investment U: What No Books, No Schools, No Brokers Will Teach You www.investmentu.com