Have you ever wondered if a certain unpopular investment might actually be an opportunity in disguise? That kind of contrary thinking is my specialty. Hated stocks, hated sectors? Count me in.

Investors stand to earn the juiciest profits when they buy the right stocks in a depressed condition and wait to cash in when they turn around.

For instance, in the aftermath of the devastating earthquake and tsunami that rocked Japan last year and severely damaged its Fukushima nuclear reactor, uranium company shares have ranked right below despotic dictators in popularity. Now, though, that could be changing, and it places great opportunity directly in our path.

The key is to identify the turnaround point. In order to do this, I study insider buying, fundamentals and investor sentiment. Most important, I rely on proprietary forecasting tools at Hedgehog Trader that we call Alpha Signals. (To learn more, visit: http://www.gohht.com/alpha.php)

These signals have proven successful for us in the past, and they’re highlighting the potential for these two uranium companies to outperform in Q1. So far, our forecasts are looking quite accurate on both stocks.

Here’s what we’re seeing as some of the factors behind a potential comeback in this beaten-down sector:

• After an eight-month uranium stock correction and with tax-loss selling over, sellers have capitulated.
• All but the most diehard of investors and analysts are neutral or negative toward uranium stocks.
• Bearish publications are bullish contrarian signs: A Motley Fool article called uranium a “dying business” in December, while Zacks put Cameco (see below) on its sell list in early January (ouch!)
• Uranium stock valuations are now at attractive levels.
• Insiders have been buyers of uranium stocks for many months, much like in 2008.
• China is aggressively building nuclear reactors and may decide to secure uranium supply by taking over some advanced projects.
• Surprisingly, only 62% of all uranium produced comes from uranium mines, and these mines are dwindling.
• Also, 30% of uranium supply comes from plutonium from dismantled Cold War nuclear weapons stockpiles (such as missile warheads), a supply that’s expected to last only until 2013.
• Uranium mine development has been curtailed due to low prices, as was the case for gold and silver mines in 2001.

Cameco: Sure to Attract Institutional Money

Few uranium stocks have enough capitalization to absorb large-scale institutional buying. But uranium producer Cameco (NYSE:CCJ) and its $8.9 billion market cap make it a logical uranium stock for institutions to purchase. And institutions have snapped up a few shares as the stock has rebounded over 25% this month. More important, it has regained its psychologically important 200-day moving average (see chart below).

Investment funds also want to own best of breed, and Cameco is one of the world’s largest uranium producers, yielding 16% of the world’s supply from its properties in Canada, the U.S. and Kazakhstan. In addition, Cameco possesses an impressive resource base of uranium, totaling over 476 million pounds of proven and probable reserves.

Another positive sign for Cameco is that company insiders have been buying shares since the fall. In fact, four different insiders purchased a total of 19,800 shares between Nov. 30 and Dec. 19. Multiple insider purchases are a very bullish sign. While insiders sell for various reasons (to pay bills, etc.), the main reason they buy is the belief that their company’s stock is undervalued and is going to go up.

We also like Cameco based our specific Alpha Forecast that suggests shares are likely to move higher over the next three months. One additional selling point for retail and institutional investors is that Cameco pays a solid 1.7% dividend, which helps investors remain patient in a volatile market.

URRE: Are We About to See a Nuclear Price Explosion?

Uranium Resources (NASDAQ:URRE) is a far smaller ($105 million market cap) but still very intriguing uranium asset play because it boasts 101.4 million pounds of mineralized uranium material in New Mexico. The company is run by an experienced management team and is working toward uranium production by mid-2013. It also possess an NRC license to produce up to 3 million pounds of uranium. Another potential catalyst: Uranium Resources is involved in an exploration joint venture with a Cameco subsidiary on its Los Finados property in Texas.

In the last eight months, URRE has seen no insider buying but also no selling — a bullish sign. This is a stock that soared suddenly from 50 cents to $4 last year, so it could be a big mover when we find ourselves in a bullish uranium environment.

What’s more, shares have risen over 30% since their December lows and appear headed for their 200 day-moving average at $1.30.

Our Alpha Signals forecast a nice rise for this high-beta stock in Q1, as uranium prices recover and risk capital flows back into the junior uranium stocks.

I look forward to providing you with more contrarian plays ahead!

I don’t currently hold any of the stocks mentioned here. Follow me at http://www.twitter.com/HedgehogTrader, where I share commentary and forecasts on stocks and commodities. (In fact: On Friday we correctly predicted the strong rebound in natural gas prices this week!)