Just Go With It… 3 Indicators Signaling A Buy In Natural Gas
It’s hard to fight with some things in life.
Topping my personal list is arguing with your spouse. Seriously, how fun is that fight? And it’s also hard to fight a trend. It’s doubly true in the financial world.
“The trend is your friend”, to fire off an old cliché…
New trends start daily and it’s important to know what to look for. Right now one industry is showing three signals a new trend is forming. Our new trend could run for the next three to five years.
Let me explain…
Unless you’re living in your basement, you’re probably aware of the world chaos occurring almost daily. What most investors miss is the chaos all revolves around energy.
First off, we have a nuclear meltdown in Japan. Everyone knows the earthquake and tsunami caused it. But, here’s the big problem. Twenty years from now, the Japanese could still be cleaning up the mess.
Some experts are estimating it will take over a decade and billions of dollars just to contain the disaster.
Sign number one of the new trend… The world is now looking for nuclear energy alternatives.
Most countries’ nuclear programs have gone on hold. And it means we need something different.
This brings us to the second key sign…
President Obama is declaring the need for a new energy strategy. It’s truly exciting news to hear the President is climbing on board. He’s pushing the use of domestic energy resources. In his March 30th speech, he made it clear…
America “will keep on being a victim to shifts in the oil market until we get serious about a long-term policy for secure, affordable energy.”
If you’ve followed President Obama domestic energy policy, you’d be shocked at those words…
The way he handled the BP oil spill was to “shut it down”, by completely banning new offshore drilling. And the ban did nothing to address the problem of one faulty piece of equipment.
Obama’s now flip-flopped 180 degrees since the worst oil drilling accident in history. As Obama gave his speech, critics pointed out energy companies in the US still have a record low number of drilling permits approved by his administration.
But will Obama’s new energy stance mean a change for oil and gas drillers?
It appears our President may actually be looking to use cleaner US fossil fuels as a bridge. Obama publicly gave support for a natural gas bill already in Congress… The Pickens Plan.
And this gives us sign number two… A Democratic President is willing to start utilizing US fossil fuels to reduce foreign energy dependence.
Let’s get to the point. What’s the trend? How can we make money?
Sign number three comes direct from the market in question, Natural Gas (NG).
Right now natural gas is trading at a discount to its 10-year price average. Current prices are around $4.30 per MMBtu. The 10-year average is just over $5.
But more importantly, natural gas is getting a bid…
Last week production and capacity reports showed natural gas inventories building by 12 billion cubic feet. On the report, prices fell. It’s a natural reaction since one of the strongest factors affecting natural gas prices are supply & demand.
But amazingly, the drop didn’t last. By the end of the same day, natural gas prices closed higher! Each new sell off in natural gas is being seen as a buying opportunity. And that’s sign number three of the trend!
Here’s the meat of it…
These three indicators… the quest for nuclear alternatives, presidential support, and a strong market all show natural gas heading higher.
And one of the best values out there is Natural Gas Services (NGS).
NGS is a leading provider of compressors, compressor servicing, and flare systems for natural gas wells. NGS pulled in revenues of over $53 million in 2010 and has an EPS of $0.58. Since they sit on $19 million in cash with only $2 million in debt, NGS is in a great position to grow as demand increases.
We’re set for a major run in natural gas in the next few years. Natural gas demand will surge as our country converts to cleaner fossil fuels. And as the cleanest fossil fuel, natural gas will be our “bridge” to many carbon free energy sources like solar, wind, and geothermal power.
There’s no better time to get natural gas into your portfolio. The trend here is clearly moving higher. So just go with it…
Category: Commodities
