Uranium Energy (UEC – AMEX)

Dear Bottarelli Research Member,

After last week’s full position update, I’ll keep today’s introduction section short. First, I’ll offer some updates on our recent small-cap plays. Second, I’d like to begin trimming down our small-cap ledger leading into the end of 2007 by closing out some of our under-performing positions. Even though some of these picks still have tremendous underlying reasons for owning them, they have just not moved as I had expected. Since our money could be used more effectively in other positions (and with tax season right around the corner), the time to tighten up the ledger is now. And then finally, I’ll offer you today’s newest small-cap pick. So let’s get right into it!

UPDATES

Parker Drilling (PKD – NYSE): Earnings came out this week and the numbers were great. Revenues were up 39% in the third quarter, but what I really liked is the fact that their Quail Tool segment is doing excellent. Returns in this segment went from flat to record-breaking in this last quarter, and the CEO gave a very positive outlook heading into 2008. PKD is one of a handful of stocks that actually showed strength on a down market week, so let’s continue to hold our position. This stock finally looks ready to rebound!

ION Geophysical Corporation (IO – NYSE): Note the name change. Input/Output is now called ION Geophysical Corporation, and they just reported very strong earnings, up 70% from the third quarter of 2006. There is no doubt that IO is in the right sector. Their new seismic mapping technology should really begin kicking the stock into high gear. In fact, their technology could change the way many drillers, explorers, and producers all do business, and this should be the catalyst that helps the stock finally make its upside move. But if I don’t see IO moving upwards soon, it might be time to close out this position. We’ll hold it for now, but the leash has officially been shortened.

Origin Agritech Limited (SEED – NASDAQ): Recent price action has me very concerned. It looks like short sellers have been selling into the huge upside pop that the stock experienced on October 10^th and October 11^th. But despite this pullback, I have to tell you: SEED is a screaming buy on the chart and I’m adding to my position at these levels.

Tactical Note: While I have a moment, I’d like to share with you a secret small-cap trading technique that I personally use to keep brokers from lending out your shares to be shorted. After you buy a small-cap position (and get your fill), immediately turn around and place a sell order 100% above your entry price. In the case of SEED, I currently have a sell order right now at $20.00 per share. This type of order will stop brokers and market makers from having the ability to loan out your shares to be shorted. In fact, I would like to use this technique from here on out on all of our picks. I suggest using a 100% return as your sell price on all of your buys.

China Precision Steel (CPSL – NASDAQ): Just after we put this pick out, CPSL came out and said they were selling more shares to acquire financing. This news was rather shocking to everyone, so let’s sit tight on it for now and see how the shares react over the next few weeks. Nothing fundamentally has changed here, so I still expect the stock to move higher. Hold.

Terra Nostra Resources (TNRO.OB): As we mentioned last week, an extremely negative article was written about this company. From what I gathered after speaking with their investor relations consultant, this article was posted by short sellers involved in artificially dropping the stock price. After speaking with TNRO officials for about an hour, I came away feeling relieved about their future. I was also told that more news will soon be coming forward – and low and behold, they just announced that they’re working towards a listing on the AMEX! Looking at the chart, I believe we’re setting up for a big run, so let’s give TNRO time to move. Hold.

SELL RECOMMENDATIONS

Raptor Networks Technology (RPTN.OB): Despite my bullish view, the technology strength in the overall markets has not sparked the upside move I expected in RPTN, so it’s time to let this one go. I may revisit RPTN at a later date, but for now let’s close it out. Sell.

Nevtah Capital Management (NTAH.PK): Lets also sell NTAH. By now, I would have expected to hear something from their meeting with the Utah government, but nothing is coming forward so I’m letting this one go as well. Sell.

On a more positive note, I want to make very sure you have taken all of your seed money off the table on JA Solar Holdings (JASO – NASDAQ), WorldWater & Solar Technologies (WWAT.OB), Sinovac Biotech (SVA – AMEX), and US Geothermal (UGTH.OB).We have seen at least 100% gains in each of these positions, so it’s time to cash out your original investment and let the remainder of these powerful plays ride.

In an amazing display of strength, JASO hit an intra-day high of $72.06 yesterday, blowing away my year-end price target of $65.00. We’re now up 206% on this position, so keep enjoying the ride!

Also, Uranium Resources (URRE – NASDAQ) has also moved aggressively higher, so it’s now time to take your seed money off the table anywhere between $14.00 and $15.00 per share and let the remainder of the position ride. Similar to JASO, we’re currently up 242.24% on this position, so let’s sell half and then keep enjoying any future upside!

Now on to this week’s pick…

With oil prices closing in on $100 a barrel, I want to take full advantage of the recent sell off in uranium prices to get positioned for another powerful upside run. Some very influential people (notably T. Boone Pickins) are saying that oil prices will hit $120 by next year, and that makes a very strong case for alternative power sources like uranium.

The company I’m recommending this week is one that I’ve been monitoring for months. They’ve been quietly acquiring huge land leases in known uranium mining districts in Texas, New Mexico, and the Powder River Basin of Wyoming. Not only that, but they control one of the largest historical uranium exploration and development databases in the U.S. This by itself is huge, and that’s why I want this stock in our small-cap portfolio immediately.

Not only that, but in October, they just announced that they had submitted a mine permit application with the Texas Commission on Environmental Quality (TCEQ) to begin in-situ recovery of uranium in Texas. In-situ recovery, or ISR for short, is a very viable recovery method of extracting uranium. This tells me that their goal of becoming a producer is growing closer day by day. I am very bullish.

It’s also important to realize that this company is doing business in places that are very friendly towards uranium projects. Speaking with people inside this business, many states do not want mining to occur, so they make it extremely hard to get the permits. But that’s not the case in states like Texas and New Mexico where this company is operating. That’s also a bullish catalyst.

Let’s face it: We are not producing nearly enough “yellow cake” to meet our country’s needs. And with the push for clean energy now in high gear across the globe, nuclear energy is once again taking center stage. This company owns one of the largest uranium databases right here in our own backyard, so the time to get positioned is now!

The company is called Uranium Energy Corporation (UEC -AMEX), and let’s enter a position anywhere under $4.60 per share.

Have a great week!

Sincerely,

Mark Blattert,

“In the next five to ten years America will once again become a uranium producing giant. This is the exciting opportunity that Uranium Energy has positioned itself to capture.”

- Amir Adnani, Founder and CEO

Before getting into this week’s play on Uranium Energy (UEC – AMEX), let’s quickly review the performance of our last uranium play, Uranium Resources (URRE – NASDAQ).As you’ll see, the similarities between these two companies are very striking.

URRE owns and operates uranium mining properties in the United States. The company was originally recommended by Bottarelli Research Small Cap on March 23^rd, 2007 for $4.38 per share when it was trading on the bulletin board. Since then, it has moved over to the NASDAQ where it currently trades for $14.99. That’s good for a 242.24% return!

This same upside price action could happen with today’s newest pick, Uranium Energy (UEC – AMEX).

I’ll get more into this in just a moment, but first let’s quickly refresh our memory on the benefits and investment thesis of uranium.

URANIUM REFRESHER

Uranium is a white/black metallic chemical element with the highest atomic weight of any naturally occurring elements. It’s a safe, efficient, and emission-free alternative to fossil fuels – making the ideal fuel for today’s commercial nuclear power plants. In fact, one kilogram of uranium can produce about 20 trillion joules of energy. That’s as much electricity as 1,500 tonnes (metric tons) of coal! Because of this, alternative energy experts feel that uranium will supply “the world’s first significant alternative energy boom.”

The bullish case for uranium is everywhere. In response to growing public recognition that nuclear power generates electricity with considerably less emissions than fossil fuels, President Bush signed the Domenici-Barton Energy Policy Act into law in August of 2005. This legislation contained a number of provisions that support nuclear power – which officially kick-started the bullish run in uranium.

As you read this, the United States has 104 functional nuclear reactors that generate more than 100 million megawatts of electricity each year. That’s 20% of our country’s total energy supply! These plants use 55 million pounds of uranium each year, making the U.S. the largest user of uranium in the world (by far).

As Mark mentioned above, nuclear energy production is gaining global attention thanks to record high oil and natural gas prices. Even despite the rising price of uranium, electric companies in the U.S. are scheduled to begin construction on eight new nuclear plants. And on a global scale, the construction of new nuclear power plants is even greater.

China, India, and Russia alone have received permits to begin construction on 75 new reactors, all of which need uranium to operate. With those major tailwinds, it’s no wonder that uranium exploration has increased 54% year over year.

In fact, 4.7 million tonnes of uranium reserves are known to exist, but that’ll still result in a supply shortfall of 80 million pounds per year for several coming years! And when you have such a supply/demand imbalance, this make a very bullish case for a company like Uranium Energy (UEC – AMEX).

You see, according to the U.S. Department of Energy, 516 million feet of uranium exploration and development drilling has been recorded in the United States. According to these records, the largest sources of uranium ore in the United States are found in Colorado, Utah, New Mexico, and Arizona. That’s where UEC comes into play.

Founded in 2003 and based in Austin, Texas, Uranium Energy is a junior resource company that has the objective of becoming a near-term ISR uranium producer in the United States. They currently own interests in a number of properties located in Texas, New Mexico, Wyoming, Colorado, Utah, and Arizona. Claims and acreages are summarized below:

Now this is important: Acquiring this long list of properties was not a fluke. You see, UEC controls one of the largest historical uranium exploration and development databases in the U.S.

This historical uranium exploration data contain 4.6 million feet of drilling data, including hole location maps, reserve and resource calculation reports, and geological studies. This database cost literally millions upon millions of dollars in past exploration expenditures, most of which was incurred by senior energy companies years ago.But as uranium exploration died down, the major oil and energy companies funding these exploration initiatives abandoned their uranium mining activities – leaving behind countless drill projects with abnormal uranium potential.

Now twenty years later, uranium exploration is “in play” once again, and UEC was smart enough to acquire all of this historical drill data! As you can imagine, this data provides invaluable clues about where previously-discovered uranium resources could be lying – which allows UEC’s geologists and engineers to precisely target land acquisition programs more accurately and inexpensively than any other uranium company in existence. Uranium exploration companies without this powerful data, for example, must rely on surface geology to guide their acquisitions – and this extra step makes uranium production significantly more expensive. This powerful market advantage has helped UEC successfully identify several historically-indicated uranium deposits and acquire these properties. Below is a summary of the databases to which UEC owns the rights.

Using this data, UEC has successfully acquired property containing 14.1 million pounds of historic uranium resources, with potential targets of 30.5 million pounds in additional resources. Their primary project in Goliad County, Texas contains 5.2 million pounds of uranium resources – with the potential getting as high as 10 million pounds in additional resources. With that type of potential, this project could lead to production as early as 2009 – and this could be the bullish trigger that shoots UEC’s share price higher for most of 2008.

But that’s not all. Back in July, the world’s largest “yellow cake” producer, Cameco (CCJ – NYSE), announced that their most lucrative Cigar Lake uranium mine flooded after part of their mine collapsed.

With this major uranium-producing mine now underwater (and not scheduled to be at full strength until 2011), uranium experts expect this disaster to tighten up the uranium supply even more. For example, since a large majority of the anticipated uranium from Cigar Lake mine was pre-sold, empty-handed buyers are now forced to search out uranium from other places – and this could offer a tremors upside lift to a rapidly-growing producer like Uranium Energy (UEC – AMEX).That’s why investing today makes so much sense.

You see, as more and more investors realize what you just learned, you’ll see stronger buying activity in UEC – and this prompted UEC to move from the bulletin board to the American Stock Exchange (AMEX). In fact, on October 30^th, Uranium Energy celebrated its recent listing on the American Stock Exchange by ringing the ceremonial opening bell (pictured below).

With a market cap of only $161.36 million, UEC has a lot of room to the upside. With total cash of $10.79 million and zero debt, UEC is well-positioned to capitalize on the bullishness in the uranium markets over the next 2-3 years. In fact, dating back to June 9^th of 2006, there have been 20 insider transactions on UEC: 18 buys and only 2 sells. This tells you that management carries this same bullish view. With all of the tailwinds for the next major uranium winner, let’s add UEC to our small-cap ledger now!

PLAY: Buy shares of Uranium Energy (UEC – AMEX) at or under $4.60, good for the week.

Sincerely,