The 60% Rally No One is Talking About
Nathan Slaughter of Scarcity & Real Wealth made a great point in his most recent issue…
Can you imagine the buzz if gold had spiked 60% during the past few months?
Media outlets would be talking about it nonstop. Retirees would be urged to cash in their IRA accounts for Krugerrands.
It would be the same type of frenzy if oil had just soared 60%.
There would be congressional inquiries exploring the effect of speculative trading. Financial pundits would be spouting that crude was headed straight to $200 per barrel.
Yet one of the world’s most important commodities has soared… and barely anyone has said a word.#-ad_banner-#
Natural gas prices have soared as much as 60% since April before pulling back slightly. Today, prices sit near $3 per thousand cubic feet (Mcf), up from below $2 in late April.
But telling you about what has already happened doesn’t make you a better investor. Nor will it make you any money.
That’s why I want to tell you about what could come next…
Natural gas stocks fall into a category of investments that Nathan refers to as “overlooked and underappreciated” — stocks that are left for dead and trading well below any rational assessment of the company’s assets.
And that’s where the opportunity lies for investors. You see, while natural gas has rebounded, the shares of most natural gas companies haven’t budged.
To be fair, natural gas stocks have held up better than the price of natural gas in the past few years — so you can’t expect a direct correlation.
However, as you’ll see from Nathan, there is reason to think natural gas prices could continue rising… even after their run in the past few months. And if that happens, then these “overlooked and underappreciated” natural gas stocks might become some of the market‘s best performers.
In fact, Nathan has already made the right call once in this area. In late April, he devoted a section of his Scarcity & Real Wealth advisory to an unmistakable claim, stating, “Now is the time to invest in natural gas.”
His call turned out to be just four days after the bottom. Within a month, natural gas was already 35% higher.
So why could natural gas prices continue to move higher from here? Nathan outlined all the bullish factors in his recent issue…
1. Low natural gas prices (despite the recent runup) have prompted many producers to abandon gas fields. The number of natural gas oil rigs in the United States has dropped to a 13-year low, down 46.8% from a peak in October 2011. Fewer rigs mean falling supply.
2. Chemical plants are increasingly converting cheap and abundant natural gas into products — especially plastics. And there’s a building boom taking place. In Texas alone, there are new projects in the works in at least a dozen chemical plants, making for the largest petrochemical expansion in the state since “the days of cheap oil in the 1980s,” according to The New York Times.
3. Natural gas is rapidly displacing coal on the power grid. Thanks to a favorable price differential and environmental considerations, natural gas matched coal as the primary source of U.S. power generation for the first time in April.
4. Natural gas is becoming a favored transportation fuel. Considering that compressed natural gas (CNG) is about $1.50 per gallon cheaper than gasoline, the number of CNG vehicles on the road is going nowhere but up as fleet owners such as UPS (NYSE: UPS) eye millions of dollars in annual cost savings.
5. Liquefied natural gas (LNG) exports are about to boom. Natural gas might cost $3 per Mcf in the United States, but it trades for $10 per Mcf in much of Europe and has recently fetched more than $19 per Mcf in parts of Asia. The key to taking advantage of the price difference is to chill natural gas into liquid form, where it can be transported great distances by ship. North America’s LNG export industry isn’t ready for business just yet. But soon, it will open a pathway for North American shale gas to reach higher-paying markets overseas.
As Nathan said in his most recent issue of Scarcity & Real Wealth, “Any one of these factors might do the job by itself. Two or three working in unison would be a powerful tailwind. But all five factors are still in play.”
Action to Take –> If you haven’t exposed yourself to the natural gas rally, then there’s still time. Because the boom in production caused prices to plummet to such incredible depths, we’re likely in for a long, sustained rebound in prices, as natural gas becomes a widespread disrupting force in the way we power our homes, drive our cars and make our household products.
P.S. If you’ve been looking to add resource stocks to your portfolio, then now may be the time. The global trend for commodities is rising demand coupled with shrinking supplies. That’s why we’ve seen soaring prices for years… and it means short-term sell-offs can be rare buying opportunities. To learn more about Nathan’s Scarcity & Real Wealth, which focuses solely on the market’s best resource investments, visit this link.