GIS Earnings And Uranium

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

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


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