An enormous opportunity is opening up right now – in an energy sector that has been largely ignored by the public.
Imagine focusing on companies like Amazon and Microsoft at the beginning of the internet boom of the late 1990s.
It is no secret that right now the U.S. is considered “the Saudi Arabia of natural gas”. Thanks to drilling technology advances, the U.S. has over a 100-year supply of natural gas. This has driven natural gas prices down.
However, whilst natural gas prices may be low in the U.S., they are still very expensive in other parts of the world like Europe and Asia.
There is a huge demand for this clean fuel in growing economies like India, China and Japan. The huge market therefore is in the export of liquefied natural gas (LNG) from America to these nations.
By 2020 up to 12% of the LNG traded in the world will come from the United States (according to energy giant Gazprom).
Cheap natural gas may be awful news to companies that produce this fuel, but it is great news to 4 types of companies:
1. Companies that make engines that run on natural gas;
2. Companies licensed in the U.S. to build LNG export facilities (such as Cheniere Energy – stock symbol LNG).
3. Companies involved in LNG storage like Chart Industries (GTLS)
4. Companies which build natural gas terminals.
Let’s remember that the natural gas as a transportation fuel is also greatly cheaper than gasoline. Already trucking companies, Waste Management, UPS, Coca-Cola, and Wal-Mart are purchasing trucks with engines that operate on natural gas. Soon, Ford and GM will be selling cars that run on the clean fuel.
From the companies mentioned above my favourite still remains Cheniere Energy (LNG). So far it is the only company licensed in the U.S. to build a facility to export liquefied natural gas.
Let’s take a look first at the chart of LNG to find an entry point to “load up” on this stock:
Readers of this newsletter will already have made a profit on Cheniere Energy (LNG) since I recommended it back in November. It is up 45%.
In my view LNG is a bit extended and therefore “expensive” to buy. Therefore, a pull back or correction to support (red line) at $20 or $19 could be a much better buy point. A stop-loss can be placed just below $17 for protection.
As for natural gas the commodity itself (NG), it is currently resting on a very important supporting trendline:
If NG can hold this level, and not close below it then I’d be interested to position myself for buying Natural Gas CFDs (contracts for difference).
Here is a short video I made a while ago which can help you trade the commodity (and the stock) on your broker’s platform.
Alessio is a stock market trader at www.leadingtrader.com