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Unusual Volume Points to Underrated Opportunity in NuScale Power (SMR)

Barchart - Mon Mar 6, 2023

Generally speaking, it’s best to avoid market speculation unless fundamentally compelling reasons exist to do so. With recent unusual options volume activity surrounding nuclear energy specialist NuScale Power (SMR), this may well be one of those opportunities. To be 100% clear, SMR stock represents a hefty risk. However, for gambling with funds earmarked for speculation, it could be well worth consideration under a controlled, disciplined approach.

First, NuScale focuses on an innovative technology called small modular reactors (SMRs), hence the ticker symbol. Featuring a condensed physical profile, SMRs can be integrated in areas where much larger traditional nuclear facilities would simply not fit. Moreover, NuScale’s advanced facilities feature the latest evolution in safety technologies and mechanisms, thus helping put to ease one of the underlying sector’s greatest concerns.

Second, because of NuScale’s broader adaptability, they can be integrated closer to sources of demand. In this manner, the company represents the energy sector’s equivalent of edge computing. By quickly installing these facilities across a wider canvas, they may power various communities and industrial applications at an advantageous cost profile.

Further, the world isn’t getting smaller. According to FinancialBuzz.com, “[t]he development of SMRs has been driven by the need for clean, safe, and flexible energy sources to meet the growing energy demands of the world. Generally, modern small reactors for power generation, and especially SMRs, are expected to have greater simplicity of design, economy of series production largely in factories, short construction times, and reduced siting costs.”

Not surprisingly, then, the bulls have caught on. Following the close of the March 3 session, SMR stock ranked among the highlights of Barchart.com’s screener for unusual stock options volume. Specifically, total volume reached 3,250 contracts against an open interest reading of 26,571. The delta between the Friday session volume and the trailing one-month average volume hit 372.38%.

Moreover, call volume came out to 3,081 contracts against put volume of only 87. Therefore, the put/call volume ratio fell to a subterranean 0.03, mathematically favoring the bulls. Below are three more reasons to consider SMR stock.

Geopolitics Favor SMR Stock

When Russia launched its brazen invasion of Ukraine, it didn’t just represent an utterly senseless waste of human life. It also ruptured geopolitical norms that may take years if not decades to heal.

Initially, the frustrating trickle of support among western nations backing Ukraine likely came down to a sense of salvaging relations with Russia. After all, the country owns vast natural resources critical to fueling modern societies. However, as the war dragged on – and with the Russians demonstrating no good-faith effort of calling off the violence – western support for Ukraine increased.

Generally, a sense exists that the west (particularly Europe) cannot go back to business as usual with Russia. In addition, there’s zero indication that the Russians themselves would welcome an immediate reproachment with their western former economic partners – partners who provided immense military aid that led to the loss of tens (if not hundreds) of thousands of Russian soldiers.

Therefore, alternative sources of energy may be the only viable solution moving forward. And SMRs present an intriguing pathway, thus bolstering SMR stock.

The Energy Density Equation

Even without geopolitics involved, advanced economies continue to expand, meaning that energy supplies will remain a critical factor for well into the future. And while the broader political framework tends to focus on clean renewable energy sources, nuclear power cannot be taken out of the equation.

For one thing, from an emissions standpoint, nuclear energy represents a clean power source. So long as safety concerns are adequately addressed, nuclear facilities can easily fill the gap left behind common renewable infrastructures such as wind and solar. While the latter two sources are intermittent, nuclear facilities feature a capacity factor of 92.5%. No other energy source comes close.

Just as importantly, nuclear power offers astounding energy density. According to the Nuclear Energy Institute, one uranium fuel pellet carries as much potential energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas.

You’re just not going to get that from other competing energy sources.

Undergirding Compelling Innovations

Thanks to SMRs’ organic ability to foster superior economies of scale, the underlying tech can help undergird many other compelling innovations. In particular, investors researching SMR stock should consider the broader implications for desalination.

Just like it sounds, desalination is the process of converting ocean water into potable (drinking) water. As you’re probably aware, water scarcity represents an alarming global crisis. Unfortunately, the process of desalination is an energy intensive and therefore, not particularly economically viable solution. However, SMRs may change that.

According to a spokesperson for the International Atomic Energy Agency, “SMRs could play a key role in mitigating climate change, not only due to their ability to decarbonise electric grids, owing to the quick scalability and deployment of additional modules as needed, but also because of their potential utility for non-electric applications such as seawater desalination and heat and hydrogen production, processes that have up to this point been driven primarily by fossil fuels.”

Presently priced at less than 2% up from its initial offering price, SMR stock could be the bargain of the decade.



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On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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