On August 18, I sent you an Outsider Club email with the not-so-subtle subject line: One to Buy Now.
The purpose of that email was to encourage you to buy shares of America’s largest independent nuclear power company, Vistra (NYSE: VST). The stock was trading for $79.35 at the close of trading that day.
Now, if you’re a regular reader of Outsider Club, this wasn’t the first time you’ve heard about Vistra. We’ve discussed it several times as a way to capitalize on the insatiable power demands for AI applications. Hammer and I became convinced that nuclear power would be a significant part of the solution earlier this year. And our conviction that you, dear reader, could make some solid profits from nuclear stocks has proven to be a very good call…
There has been a tremendous amount of attention on nuclear stocks over the last 6 weeks or so. The most significant: Constellation (NYSE: CEG) would restart one of the Three Mile Island reactors and sell all of the electricity to Microsft for the next 20 years.
We told you Constellation was considering restarting Three Mile Island on June 13 – shares were trading for $220.
When that news broke, the share price for all the nuclear stocks we’ve been telling you about launched higher…
Constellation shares jumped from $208 to $255 in one day and it currently trades at $277.
Vistra has done even better. From the Outsider Club’s August 18 recommendation at $79.35, the stock has run to $136. That is a massive 72% gain in less than 6 weeks.
Yes, Hammer and I are good at what we do.
Good Stories Get Better, Bad Stories Get Worse
I’ve been trading stocks and options – and writing about it – for 27 years. I was very fortunate to have some outstanding mentors take me under their wing. There’s no way to repay that kind of gift, all you can do is pay it forward…
One little chestnut I pass on is: that good stories get better, and bad stories get worse.
I’ve found that this basic observation applies to individual stocks, and the market as a whole. It helps understand the dynamics of bull and bear markets, and it plays out in the economy…
Like when that door blew off a Boeing MAX plane, it wasn’t a one-off (ha!). It was more like the tip of the iceberg. Or when inflation started spiking, 2%…3%…5%… at every stop along the way, Fed Chair Powell basically said “OK, that’s it, inflation isn’t going to go any higher…”
But it kept going higher – because that’s how trends work. They have inertia. They don’t end on their own. They only end after being acted on by an outside force.
At the same time, it is also true that the longer a trend runs, the more vulnerable they become to an outside force. We could point to the AI stock rally as an example of this – Nvidia in particular.
The stock has run as the so-called hyperscalers (Microsoft, Meta, etc) have raised their CAPEX spending on Nvidia chips. That spending trend has not changed. But investors know that it will, at some point. That’s why the stock is trading below its highs.
So, back to the Vistra story…
Open-ended Growth?
The story for nuclear is still open-ended. It’s easy to build some wild projections about it: “We’re gonna build a bunch of nuclear power plants, they’re gonna sign multi-year power supply agreements, revenue will surge, dividends will be hiked, etc, etc…”
The reality will be different. Southern Company is just now bringing the first two new nuclear reactors in decades. But it wasn’t easy, fast or cheap:
Parent company to Georgia Power, Southern Company (NYSE: SO) got approval for the Vogtle Units 3 & 4 in 2009. Construction took 15 years and cost $35 billion. Twice as long and twice as expensive. Though most of the overruns came from Unit 3 – because engineers and workers alike were learning on the job. At one point, a bunch of rebar had to be pulled and replaced because it was installed wrong.
Unit 4 came in under budget after everybody figured out how to build a nuclear reactor.
The reality of expanding nuclear in the U.S. will have challenges. Vistra is up 72% in 6 weeks. If you bought shares of Vistra, this is a good time to take something off the table. Maybe take out your initial investment and let the “free” shares ride. Maybe plan to redeploy the cash when Vistra shares correct…
In any event, congrats on the gain.
Cheers,
Briton Ryle
Chief Investment Strategist
Outsider Club
X/Twitter: https://twitter.com/BritonRyle
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