Uranium equities and the spot price of the commodity bottomed out in mid-March as the magnitude of the nuclear crisis in Japan was broadcast to the world.

But since then, there’s been an interesting divergence between the spot price and uranium equities as a group, with stocks underperforming in the recovery. (See chart below). The uranium spot price rebounded from a low of $49.25 (U.S.) per pound on March 16 to $61.13 on March 24, a gain of 24 per cent. Over roughly the same time frame, a market capitalization-weighted index of equities rose by only 15 per cent - and came under renewed selling pressure in the last week of March.

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So what's going on? RBC Dominion Securities Inc. analysts Adam Schatzker and Fraser Phillips believe it’s because spot uranium buyers and sellers are different than equity traders - with a much more intimate familiarity with the nuclear industry. “The spot buyers and sellers appear to be much less prone to the emotional swings that affect the general public, including those trading uranium equities,” the RBC analysts said.

While the commodity traders remain focused on a physical market with tight supplies, equity players are reacting more to the daily news flow of events out of Japan, which lately has shifted to concerns about the spread of radioactive contamination. “We think that the uranium equities have, in many ways, become a barometer for sentiment of the major news outlets of the world,” Mr. Schatzker and Mr. Phillips said.

The takeaway: equities should catch up once events in Japan become more of a distant memory. “We continue to believe that the uranium industry will again find its legs and that the public perception of nuclear power will shift positively,” the analysts wrote in a report.

“We think that the uranium equities will perform better toward the end of 2011 into early 2012 as the full scope of the Japanese crisis is better identified and attention is again focused on clean, economic electricity generation.”

Upside: Noting that uranium equities are now trading below their estimated net asset value estimates, RBC expects higher prices over the next 12 months for all uranium companies it covers.

Among its favourites are Cameco Corp. (CCO-T29.870.431.46%), with a price target of $38 (Canadian); Ur-Energy (URE-T1.760.052.92%), with a target of $2.75; and Uranium One (UUU-T4.010.102.56%), with a target of $6.25. All three have “outperform” ratings.