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USEC Is on Fire

NEW YORK ( TheStreet) -- Investors dream of owning the coveted the "10-bagger," a term often attributed to investing legend Peter Lynch that describes a 10-fold run-up in a stock. If investing were baseball, the "10-bagger" would be equivalent to the three-run homer, in my opinion.

While there are countless examples of stocks running up 10-fold and well beyond, they don't occur often for investors, because it's difficult to hold onto a stock long enough to reap that level of reward. Ten-baggers often take time, and in this era, buy-and-hold investing is frowned upon.

But not all 10-baggers are what they seem. One of July's huge winners is troubled uranium play USEC (USU), whose shares have risen from $2.96 on July 8 to $29.02 yesterday.

USEC provides low-grade uranium. The company -- which had operated the only U.S.-owned uranium enrichment facility in Paducah Kent. -- also provides transportation and storage for used nuclear fuel -- not without controversy-- and has done contract work for the Department of Energy. Until 1998, USEC was part of the U.S. government.

It's been a rough run for the company in recent years. USEC is shutting down its uranium-enrichment plant in Paducah, and its quest to develop and commercialize new technology at its American Centrifuge plant in Ohio has met one roadblock after another. Lower demand for uranium following Japan's nuclear disaster hasn't helped.

USEC hasn't turned a profit on an annual basis since 2010, and debt of $530 million weighs on the company. The stock slid from about $5 in early 2011 to less than 30 cents earlier this year. In order to stay listed, the USEC initiated a 1-for-25 reverse stock split earlier this month.

The stock closed at $6.65 the first day after the split, before falling more than 50% by the following week. Since then, it's been off to the races, but absent the reverse split, USEC would now be trading for just over $1.

Although it's been a nice run this month, if you've owned the stock for a while as I have, this burst of energy has represented a small recoup of some big losses. USU Chart USU data by YCharts
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