Geiger Counter Ltd (LON:GCL) has had a good run of late. With its small cap bias, this uranium-focused investment trust has taken advantage of economic recovery and is currently outperforming its peers – Baker Steel Resources, BlackRock World Mining and Yellow Cake among others.
GCL invests in the securities of companies involved in the exploration, development and production of energy. It focuses predominantly on the uranium industry but up to 30% of its assets can be invested in resource-related companies from outside the energy sector. The investment adviser is CQS, a multi-strategy asset management firm that trades as New City Investment Managers.
GCL’s top five holdings are U-R Energy (TSE:URE), Sprott Physical Uranium Trust (TSE:U.UN), ISO Energy, Kazatomprom and NexGen Energy (LON:OV9D). NexGen is the largest holding (21.83% of the fund). It has a market cap of £65 million and around 56% of its assets are based in Canada, 20% in North America – Cigar Lake being one of them – 8% in Australia and the rest are in UK, France, Zambia and Kazakhstan.
Stellar outperformance from Geiger Counter
GCL’s NAV has provided a stellar performance over the last twelve months as conditions in the uranium market have tightened. Over the last 12 months, GCL has traded between a discount of 7.5% and a premium of 15.8%, with the last few months showing a significantly higher premium than previously.Research published by QuotedData finds that in the last five years GCL is the second-best performing fund with 122.5% NAV total return (Baker Steel Resources was the best performing investment trust with 132.6%). However, GCL was the best performing trust in terms of share price total return. During that time GCL has moved from trading at a marked discount to NAV to a significant premium. In the last three years, it has mainly traded at a premium (an average of 6.6%).
As of 3 November 2021, GCL was trading at a premium of 13.3% (Baker Steel Resources and BlackRock World Mining are trading at a discount of 14.43% and 4.12% respectively). With GCL’s share price on the rise – from 33.60 GBX at end of August to 62.59 GBX – the closed-end investment company has recently issued new shares to meet investor demand.
Undoubtedly, GCL has benefitted from the rise in uranium prices but it is also outperforming its peers because of its short cap bias – 60% of the fund invests in small and micro companies – which as QuotedData notes have benefitted disproportionately during the recovery. GCL reported in September that Fission Energy, Energy Fuels, Ur-Energy and Paladin share prices registered gains of between 35% and 41% for example.
Geiger Counter has also has been reducing its level of gearing (now at 9%) for the last 18 months.
Positive outlook for uranium too
With the prospect of nuclear power replacing fossil fuels for electricity generation, uranium could fast become the commodity of the moment. Global uranium production is forecast to grow at a compound annual growth rate (CAGR) of 6.2% over the next four years to reach 65.2kt by 2025. And although modest by comparison to the price rises for LNG and coal, since August the price of uranium has risen around over 40% to $43 a pound.
In addition the uranium sector has received a huge boost as the Sprott Physical Uranium Trust (SPUT) began to acquire spot market material. Also, Geiger Counter’s portfolio managers Keith Watson and Robert Crayfourd believe that as SPUT has deployed only a small portion of its authorised US$1.3bn funding capacity, it retains considerable firepower to further tighten the market.
If nuclear power really is the panacea for avoiding climate catastrophe, then the outlook is rosy for GCL. The fund should benefit from growing demand for uranium, but there’s no denying it’s a risky investment. GCL is still classified 6 out of 7 on the summary risk indicator which means there is a high risk of losses and it is highly sensitive to uranium price fluctuations.
