The Japan Buying Opportunity

Written By Nick Hodge

Posted March 22, 2011

Do we ban air travel after a plane crashes?

Better yet, do we even have a debate about it?

What about cars after a car crash? Ferry accidents?

Did we ban coal mining after 29 miners died last year in West Virginia?

The answer to all those questions — in case you didn’t know — is no.

Reality Check

Similarly, the world will not abandon nuclear energy because of the recent disaster in Japan.

For starters, there are 440 nuclear reactors operating in dozens of countries around the globe, 437 of which were unaffected by the earthquake.

I can assure you those other plants will not be decommissioned. They may be temporarily shut down for safety inspections to reassure the sheeple — as Germany has announced for a quarter of its nukes — but they will not be taken offline permanently.

For finishers, nuclear energy provides about 15% of the world’s electricity. It’d literally take decades to replace it.

(There’s an entire trillion-dollar industry trying to do it, you know… It’s called cleantech.)

And somewhere in the middle, you’ve got the 60 reactors currently being built, the 155 planned, and the 320 proposed across the globe — as close as Canada and in “green” countries like Finland.

What’s more, many of those under construction and planned plants are in China, Russia, and India.

The world can’t convince China to give its people unrestricted Internet access… Good luck getting them to halt their nuclear program, which includes 13 operating nukes, 25 under construction, and 77 planned.

Gut Check

Here’s the advice I offered less than a week ago in this very column:

Yes, these events are horrific.

But the bird’s-eye brutal truth is that, save for those in the immediate area, these events quickly fade into history — their impact on lives, not markets.

In fact, crises like these are the strongest drivers of opportunity, for better or worse.

I added that you could make easy gains by:

… playing the dips of Shaw Group (NASDAQ: SHAW) and Cameco (NYSE: CCJ). The global nuclear industry doesn’t just grind to a halt overnight. Not all nuclear companies do business in Japan.

Today, both those stocks are up off their quake-induced lows. In the case of Cameco, you could’ve made 15% in three days as it went from below $28.50 to over $32.50.

But it’s not just nuclear stocks…

When a disaster strikes any nation, its stocks will be impacted. Japan’s Nikkei (the equivalent of our Dow) fell 20% in the days after the tsunami.

I called the exact bottom, and had my readers buy Panasonic (NYSE: PC) last Tuesday. After the masses finished their overreaction, Panasonic and the Nikkei both took off:

Nikkei and Panasonic

There’s a reason the phrase “Buy when there’s blood in the streets” is common among advanced investors.

Put on the Blinders, Stay in Your Lane

This advice isn’t mean spirited. I don’t offer it to be brash or contrarian. I offer it because it’s profitable.

I’ll also add that I offered it before Warren Buffett, who toured the media circuit this week saying he was bullish on Japan.

He declared the post-quake selloff was overdone, and that it was a “buying opportunity” for investors. Buffett added that Japan’s worst earthquake on record “will not stop the growth of the world’s economy.”

International pundit and Editor-at-Large of Time magazine, Fareed Zakaria, put a finer point on it:

It’s difficult not to get spooked by terms like “meltdown,” “radiation clouds,” and “radioactive leakage.” But let’s remember that nuclear reactors have operated peacefully, quietly, and safely for decades in countries from Japan to France to the United States.

I know there is something about nuclear power that worries us. But it’s important not to make huge public policy decisions based on perception rather than reality.

We need all the sources of energy we can find. No one source is going to satisfy the world’s energy needs. Every one has some costs and some benefits.


The takeaway is this: We are at the beginning of a decades-long energy bull market induced by population-driven demand and limited supply.

Mining accidents, oil spills, and earthquakes don’t change that.

If you’re serious about energy investing, you can leverage events such as these to further your profits in the space.

It’s difficult, I know… But sometimes you have to put on the emotional blinders and appeal to your rational side to walk away with gains in the market.

Call it like you see it,

Nick Hodge

Editor, Energy and Capital

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