Investment Contrarians

Natural Gas

Natural gas is a natural source of energy, mainly containing methane. This source of energy is used for generating power for machines and vehicles, producing electricity, and providing heat. Natural gas is usually found deep in rock formations or hydrocarbon reservoirs. Natural gas is the cleanest fossil fuel, when compared to coal and oil, as it produces less carbon dioxide. A new method of extracting natural gas through hydraulic fracturing, otherwise known as “fracking,” has opened more potential reserves. Fracking has enabled the U.S. to have one of the world’s largest recoverable reserves of natural gas.

This Commodity the Next Big Trade in Energy Stocks?

By for Investment Contrarians | Nov 27, 2013

Next Big Trade in Energy StocksIn many cases, companies in transformative industries can, at times, offer significant value—and natural gas is no exception.

At this time, I see a large amount of potential upside in this commodity. While there has been a lot of hype around electric vehicles and other alternative energy sources, I believe natural gas will play an increasingly larger role in our economy.

There are several reasons why I believe this, including the fact that the fossil fuel is quite abundant in North America; it burns clean, so it’s better for the environment than coal or oil; and it’s relatively affordable.

Now, in the trucking industry, there has been a significant shift toward natural gas-powered trucks. This includes all kinds of vehicles, from long-haul to garbage trucks.

As an example, Waste Management, Inc. (NYSE/WM) currently operates more than 2,200 of these vehicles and is continuing to convert its fleet away from diesel-powered trucks. The company recently opened its 50th natural gas fuel station. (Source: Waste Management, Inc. web site, last accessed November 25, 2013.)

The benefits are obvious, as Waste Management reduced its consumption of diesel by 8,000 gallons per year, while also cutting 22 metric tons of greenhouse gases. The lower costs for operating these vehicles and the reduction in environmentally harmful emissions are huge benefits for using this commodity as a power source.

When it comes to looking at energy stocks in the natural gas sector, we have to be careful, as there are a variety of operators. Some energy stocks are extremely young and are still incurring losses as they expand production facilities. Because natural gas prices still remain … Read More

What to Consider When Buying Stocks to Profit from Oil Prices

By for Investment Contrarians | Oct 9, 2013

Stocks to Profit from Oil PricesI think one of the most difficult factors that an investor faces when they’re considering buying stocks is the future. Obviously, no one can predict the future, but we need to diversify our portfolio so that it can protect our wealth and grow over time—meaning that investors need to think long-term when buying stocks and consider the future, no matter how abstract it might seem.

When looking at different market sectors, buying stocks in diverse parts of the economy can help to reduce overall portfolio risk and generate positive returns.

With all of the uncertainty in the world, one thing of which I am quite certain is that 10 years from now, oil prices will still be an important issue for the majority of the world.

While it’s great to see electric cars for sale, let’s be honest: these cars are expensive, and the vast majority of the world will continue to consume oil. This means that oil prices will be an important factor for many years.

I think it’s important to consider buying stocks of energy-related companies as part of a well-diversified portfolio. Some of the obvious reasons include the fact that oil prices are still quite high, and as we continue to use up our resources (limiting supply), they will continue to remain elevated due to consistent demand.

Another factor that many people don’t necessarily associate with oil prices is that energy is also a hedge against inflation. Don’t forget: inflation means a rise in prices. If an economy experiences inflation, this indicates that many parts of the economy will see an increase in price, including real estate, … Read More

What the Wealthy Are Doing to Beat Inflation

By for Investment Contrarians | Oct 7, 2013

Beat InflationWith practically every central bank around the world having the throttle fully open when it comes to monetary policy, investors with extra cash just lying around need to do something with it. While you could put this cash in a government bond or simply keep it in cash, these options aren’t going to help you beat the rate of inflation. Instead, investors should take a cue from the superrich and consider an investment strategy that includes hard assets.

As you may already know, an investment strategy that comprises hard assets includes traditional stores of wealth (such as gold and silver) and commodities (such as oil), as well as artwork and even cars.

While I advocate the traditional investment strategy of becoming a part owner in companies through equities, there are growing signs that even the superrich are becoming increasingly worried about having cash sitting idle and are looking at hard assets as part of their portfolio.

Just recently, a 1963 Ferrari “250 GTO” sold for $52.0 million! I like a nice car as much the next guy, but $52.0 million is a lot for one vehicle.

Obviously, the person buying it is not using it just to go grocery shopping; rather, it’s likely that the new owner is incorporating this item as part of their investment strategy to include hard assets (in this case, collectible cars).

To show you just how strong the market is for alternative hard assets by the extremely wealthy, a similar Ferrari 250 GTO sold last year for $35.0 million, which means this year’s sale is a 49% increase in price.

Of course, price appreciation in … Read More

Are You Prepared for the Next Commodity Boom?

By for Investment Contrarians | Apr 19, 2013

Next Commodity BoomThe recent pullback in many commodities has caused most investors to worry that perhaps the boom in commodities is over. Because of austerity and fiscal tightening around the world, countries and companies are reducing the amount of money they’re spending, which is much like the behavior of a consumer who has run out of credit and is consequently reducing his or her spending.

This will certainly have a negative impact on the commodities super cycle we’ve seen over the past decade. However, there is an investment opportunity that can benefit both the U.S. and Canada, and that opportunity is in the natural gas market sector.

Remember, when making an investment, one must understand what the advantage is for a market sector. Both the U.S. and Canada have a massive amount of natural gas in comparison to the rest of the world—that is our competitive edge.

This is providing a huge investment opportunity over the long term for the natural gas market sector. Both the potential to export natural gas and the ability of companies to use natural gas as an input will create a massive investment opportunity relative to other markets in the world.

$NATGAS Natural Gas stock chart

Chart courtesy of

Spot prices for natural gas have certainly rebounded from the lows of 2012, yet the commodity trades at a fraction of the price on the international market. Spot markets for natural gas in Asia can be four to five times higher than those in America.

Additionally, over the next decade, there will be increased demand for natural gas globally, as it is a cleaner fuel alternative to other possibilities, such as coal. … Read More

Natural Gas Prices Rebound; Where to Now?

By for Investment Contrarians | Jul 11, 2012

Natural Gas Prices Rebound; Where to NowNatural gas prices are notoriously volatile. From approximately $4.50 per one million British thermal units (MMBtu) last year to a low near $1.90 MMBtu in April, this represents a huge swing with massively divergent market views. Natural gas has become a great asset for the U.S. America is able to produce natural gas at a significantly lower cost than anywhere else in the world. This has led to a large increase in the supply, leading to a negative market view on price. The reason for the negative market view on the price of natural gas is a lack of storage facilities and an inability to ship the commodity overseas.

The storage facilities for natural gas earlier this year were on pace to be completely filled. If that were the case, the price for natural gas would have collapsed completely. If oil producers that also have natural gas being pumped out of wells have nowhere to store it, they would have no choice but to burn it up or flare it. However, Mother Nature has come to the rescue for natural gas prices, as the high temperatures across the nation have increased natural gas consumption for electricity use to generate air conditioning, improving the market view.

Much of the market view for natural gas is based on external factors, such as weather, and this can be extremely difficult to predict. We all know how difficult it is for the weatherman to be accurate; now you have to combine supply and demand dynamics with Mother Nature. As Texas accounts for a large portion of natural gas electricity generation, the weather in the … Read More