All eyes are on oil as the price of crude trends higher and higher. But one of the rules of smart investing is to look at things others have ignored or written off, because you might find real bargains there.

And this may be a good time to look at a sector we haven't looked at in a long time: uranium and nuclear power. Why? Because as oil prices dominate the headlines, the smart money is looking at uranium. As a result ...

Uranium Stocks are Rallying Sharply

Just look at this chart of the Uranium Focused Energy Fund, an investment trust in Canada. The stocks in it include Cameco, Denison Mines, Paladin Energy, Rio Tinto, Uranium One — all the big producers.

The fund has come roaring back, up a whopping 15% from its lows earlier this month. In other words, this index of uranium stocks is heading higher in a hurry.
Looking around at some of my favorite uranium stocks, I can see not only rising prices, but also methodical accumulation and rising volume. These trends indicate that the smart money is picking up shares. And I can see some reasons why.
Industry analysts are turning bullish. In fact, I've read two different positive reports on uranium recently, from MacQuarie and Merrill Lynch. I think that is re-igniting investor interest in uranium stocks. And that could lead to these stocks heating up this summer.

But despite the powerful rally currently underway, most investors are still stuck on ...

Why Uranium Prices Pulled Back

Last year I really thought that, if trends continued, uranium prices would be a lot higher than they are now. However, five things happened to derail the bullish trend:

1) Utilities stockpiled enough uranium that they weren't desperate, so they stopped emergency buying on the spot market. Now, utility companies are well covered for the next few years by their contracts with uranium suppliers. What's more, utilities are avoiding buying uranium on the spot market in the hope that the price will decline even further.

2) A supply of enriched uranium came into the market, including 200 metric tonnes from U.S. government stockpiles.

3) The downturn in uranium prices stopped investors from buying more uranium through funds like the Uranium Participation Corp.

4) Japan shut down its reactors due to safety concerns. This should continue to weigh on demand through 2008.

5) Paladin's new Langer Heinrich mine in Namibia ramped up to full capacity by the end of 2007, and mines in Kazakhstan also ramped up production.
Most of these are short-term forces. Meanwhile ...

Why Prices of Uranium and
Uranium Miners Should Now Go Up!

China has announced its intention to aggressively buy uranium resources around the globe. And it hasn't yet bought fuel for all the new reactors it plans to build. In fact, demand from China hasn't been significant ... yet.

According to the World Nuclear Association, China will build 35 nuclear reactors in the next 10 years and has 86 more on the drawing boards. This would raise its nuclear electricity producing capacity by 300%!

There are 433 nuclear plants in operation worldwide, 33 under construction, 91 in advanced planning stages, and over 200 proposed. Four plants in the United States have applied for regulatory permission to begin construction, but the bulk of the new construction is targeted for China, India, Russia, South Korea and Japan.
To the fullest extent possible, nuclear operators have been locking in forward contracts to shift the risk of shortfalls to producers. But legacy contracts at very low prices are hitting the end of terms, and new contracts will likely be negotiated at higher prices.

The U.S. government could sell more uranium from its stockpiles. However, the government says it will limit sales going forward.

Finally, rumors of takeovers and mergers are on a slow boil. At these prices, uranium miners can be screaming bargains. The latest stock of interest is Paladin Energy, based in Australia, which was tr