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.
In 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
With 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
The 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.
Chart courtesy of www.StockCharts.com
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 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