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Natural Gas & LNG – The Next Bargain Investment

Posted on July 5, 2009 by Penny Stocks Picker

When things seem cheap they probably are in the long run.  As an investor it is wise to seek out what may be a bargain price and then prepare and position yourself to capitalize on that (especially if it gets even cheaper).  I was big on gold when it was $265/ounce but now at about $930/ounce it’s no longer a steal (Silver is a better precious metals investment at this time..IMO).  So, I’m looking for the next bargain commodity that has dropped sharply in price over the last year and is now trading near it’s low.   With all that in mind, I have noticed that Natural Gas has pulled back signifincantly from a high of around $14/mmBtu in July 2008 to about $3.62/mmBTU today.  About 20 years ago the price for Natural Gas was trading around $2.00/mmBTU. 

Natural gas prices pulled back and continue to fall due in part to the economic slow down which resulted in a decrease in demand and hence an over supply.  The Economic slow down, more drilling, more in storage and mild weather have been the catalyst for the decline and may continue to place downward pressure on the price of Natural Gas.  I’ll also be watching for increased LNG (Liquefied Natural Gas) imports that could put additional increased downward pressure on the price of Natural Gas. 

The pace of imports of LNG over the last few weeks has increased since the beginning of the year and if this trend continues then I expect Natural Gas prices may be in the $2-$3/mmBTU in the very near future.  However, the sharp decline in Natural Gas prices seems to be out of balance and at some point the low price should bring back demand (cause it’s just to dang cheap) and thus place upward pressure on the price of Natural Gas and LNG.  There are various ways you can position yourself in Natural Gas.  At the moment, I like the exchange traded fund UNG and initially thought the price may retest the $12.69 low before moving back up.  I’m now beginning to think the price of Natural Gas may continue to decrease in the near term (maybe) and therefore UNG may even go as low as $10.00.  I invite you to post a comment on your opinions on the best way to position oneself to profit on a long term investment in Natural Gas or LNG.

List of stocks and and ETF to Watch.

UNG @ $13.11  (See story above.  On 6-30-09 I suggested UNG for a position in Natural Gas but noted that UNG may go as low as $12.69 before reversing.  However, I have been doing more research and now think it’s possible this ETF could even see $10.00 in the near future (see above story).  That sure would seem like a bargain.  Seriously, if Natural Gas hits the $2.00-$3.00/mmBTU range that is a deal for the long-term investor in my opinion.)

EVFL @ .0003 (Volume Breakout)

MTXX @ 6.48 (Drop from $19.22 on 6-16-09 to a low of $4.39.  I haven’t done any research on this one.  I just noticed it because of the bullish reversal candlestick that occurred Thursday, the volume.)