The Energy Report caught up with newsletter writer and commentator Lou Paquette, who launched the website Emerging Growth Stocks in 1995 to provide investors and speculators with a unique alternative to what he saw was a growing problem with corporate governance and conflict of interest on Wall Street. He believes that uranium has the supply and demand fundamentals needed to thrive, and he shares some of his favorite mining companies that are well positioned to ride out these turbulent times.

The Energy Report: On your website, it looks like you’re currently looking at uranium, renewable, and oil and gas in the energy sector. Let's get your thoughts on uranium, mostly because uranium had so much buzz and a huge run up in 2007, then went through a huge crash when the market crashed. Is it really making a comeback or is it just going to kind of limp along here with all the other stocks?

Lou Paquette: It’s kind of a flip of the coin. If you look at just uranium itself, I am told, and my understanding is, that the supply and demand fundamentals going forward are very positive, that there’s going to be more demand than there is supply in the coming years. But on top of that you have to put the price of oil. It seems like with the renewables, with the green stocks and with uranium, there seems to be a pretty strong correlation. When oil goes way up, you find that uranium kind of follows. So, you’ve got to take that into account as well.

It just so happens that oil looks like it's kind of flattening out, too. So, I kind of like the uranium play here now. I’ve been very fortunate with uranium. I did play on the way up, and just not that far from the market high, I dumped everything. I just decided we’ve had great gains with these uranium stocks. I am going to get out and raise a bunch of cash, and that has worked out really well.

And so since then, we’ve just started to get back into one or two exploration stocks in the last, say, eight months or so. So, we’re starting to nibble on the sector again.

TER: And are there any specific exploration stocks that are intriguing in the uranium area?

LP: Yes, I will mention one in uranium that we’re following; we’ve been following for a while, and I wouldn’t be surprised if you’ve heard of this one. I would consider this the top uranium discovery, and Hathor Exploration Ltd. (TSX: V.HAT, Stock Forum).

I’m also taking a look at their partners as well, Terra Ventures Inc. (TSX: V.TAS, Stock Forum). They have a 10% carried interest in the play. The reason we like that is they have hit multi-meter intersections of 5%, 10% uranium. Most uranium plays if you read them, they’re lucky to get .01% of uranium.

TER: What’s the play with Terra Ventures?

LP: Terra has a 10% carried interest with Hathor. So, they don’t need to pay any money for drilling or anything. They just get a free ride now. Hathor has multiple drills going for months, and they’re also drilling a very prospective area. And if they come out with what some are expecting, we could see a major addition to their resource this year.

Terra’s a penny stock trading up to the 40-50 cent area. And they have some other plays of their own, too.

TER: If someone were reallocating their portfolio right now, what percentage of the portfolio would you recommend being in gold, in oil and gas, uranium, and renewables?

LP: That’s a really good question; you know I can’t tell people how they should do it; they have to make up their own minds what feels good for them, but I can tell you what I’m doing. And that is about a third in gold, okay, about a third in energy, and then within that third, and about two-thirds in oil and gas, and the rest of it in uranium and renewables.

So that’s two-thirds of my holdings, and then another third everything else—cash and that sort of thing.

I don’t know if you’ve heard of an author from a long time ago; his name was Harry Browne ("How You Can Profit From the Coming Devaluation", 1970, and "You Can Profit from a Monetary Crisis", 1974). He was known for his "Permanent Portfolio." A quarter in long bonds, a quarter of your assets in gold, cash, and stocks, and then you re-balance once a year. I am doing that, but taking out the long bonds—I am actually short long bonds.

In the last issue, I recommended an ETF, an inverse ETF that will go up when long bonds go down in price. And sure enough, it’s had a really nice gain since we’ve recommended it. I wish I had more of it. You know people were talking about long bonds might be in a bubble, that might be the next bubble, and sure enough they have come off in price, and people are starting to sense that we’re going to have inflation from all this printing of money that’s been happening.

So, I have no exposure to long bonds, and about a third in cash, a third in gold, and a third in energy.

TER: Very good, Lou. Thanks for your time.

Louis Paquette launched Emerging Growth Stocks (emerginggrowthstocks.ca) in 1995 to provide investors and speculators with a unique alternative to what he saw was a growing problem with corporate governance and conflict of interest on Wall Street. Lou posts a 15-minute audio interview, “Week in Review with Lou,” most Fridays on his Emerging Growth Stocks website, along with “Charts of the Week,” featuring his technical analysis and some political rants as well. He also has a blog, www.emerginggrowthstocks.blogspot.com, which features a wide variety of interviews and articles. Lou also offers a Market/Management Psychology Investment newsletter that doesn't marry one sector but rotates with the tide of the market.

Paquette is regularly quoted in Investor's Digest, Bull & Bear, and Money Saver, and publishes on Info-mine, Kitco, and Goldseek.com, etc. He is a regular speaker on Cambridge House Investment Conference circuit.

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