Update 7/17/12 – I saw Wilbur Ross, the famed Billionaire investor who made a lot investing in Coal and getting out with perfect timing, I’m assuming when the Nat Gas Revolution kicked in, he mentioned EXCO Resources Inc (XCO) as his main Natural Gas play. Of course, he is a director. But Richard Grasso, a member of the Fast Money Panel also agreed with him about Exco. I don’t know what the price is when you read this, but as I type it’s $7.07 with a 1.53b market cap.
But I must confess, I don’t know personally whether I’ll ever invest in this industry. I just can’t get my head around it. I like companies that have zero debit and are making a net profit after tax. If you look at the financials of some of these energy companies, especially the “exploratory” ones like XCO, boy you see a lot of red ink. I know it’s normal in this type of industry, especially with a young company, but man it just doesn’t make me feel comfortable, and I can’t seem to get my head around it. I’ll probably do some more reading and investigating in my spare time. Maybe I’ll change my mind.
I was watching “Fast Money” but not on cable or Dish, mind you, but rather late at night on my iPad. There’s another major trend, the Cloud, “Cord Cutting” et. Think Apple, Roku, Amazon, Google/Youtube, Facebook, et. al, which of course a sub component of the larger “All Media is Moving to the Web” (Think the infrastructure plays that are continuing to build that out (EZCH, RAX, etc.) but also think: Get your own website! And preferably buy your hosting on $RAX’s “Cloud Sites, through me, here: http://rackspacereseller.com/Plans.html (As Cramer would say, “Buy, buy, buy, buy, buy, buy!” hahhahahahahhahhah!
But anyway, back to the topic at hand. Another trend has been brewing for the last few years: Natural Gas. I’ve been mostly concentrating on Tech lately, but this episode of “Fast Money” reminded me of the Natural Gas trend. I believe it was either Dennis Gartman or perhaps the Chairman of (WTR) whom they had on who said, “In 10 Years the Whole Economy will be powered by Natural Gas.”
That took me aback. That’s a powerful paradigm. Dennis Gartman said that the best way to play it is through Chesapeake Energy (CHK). Wow I noticed they are down 6.5% today. I think the issue of the moment is that Nat Gas is very cheap right now because so much has been found and developed (via new “technology”) and yet the economy as a whole is just in the burgeoning phases of changing its infrastructure to utilize it for things other than your heat during winter. (Nat Gas cars, etc.)
One interesting point brought up was that the price for Nat Gas in Europe and other places is about 5 times higher. So there is a market for shipping, exporting it. The problem is that is a very expensive thing to do. So Gartman pushed back a bit on Cheniere Energy (LNG) which is the company building the ships (or are they purchasing the ships and then selling the shipping?) because of how expensive it was to do so. But then Grasso pushed back on him, saying that he was long ING because they were the only one doing it, the only ones with the permits, regulations, technology to do it, and so they had a monopoly on shipping the stuff. In the end Gartman agreed that LNG was a good way to play the paradigm in the long run. I believe he just had short term misgivings about the expense.
Another interesting Company brought up was Aqua America Inc (WTR), which is a Water Company in general, but a growing part of their business is supplying the water for the “Hydro Fracking” I believe they call it process. This company seemed to be a solid company overall, not just because of their Nat Gas exposure, and indeed the Nat Gas business was only adding about a penny a share in earnings at the moment, but was considered to grow substantially over the coming years.
Just as an afterthought, it wasn’t mentioned on the show, but a company my brother told me about Mcmoran Exploration Co (MMR), whom I haven’t taken the time to sit down an research, so I don’t know exactly what they do (although I know it’s in Nat Gas) They have been in my iPhone finance app though, and they haven’t done really anything as far as price movement (between $11-12 for most of this time) but you have to considered how dramatically Nat Gas has dropped over the last year or so too.
I remember like a year ago, listening to the Bloomberg Podcast app on my iPad and this analyst was highly recommending the Nat Gas ETF: United States Natural Gas Fund, LP (UNG) because in his opinion Natural Gas was priced for “Nirvana” and that any disruption would cause a spike. Glad I didn’t take his advice. I think the price is down 50-75% since then. So what’s next after “Nirvana”?
But anyway, will I invest in any of these? I don’t know. I’m so immersed in the tech field that I really “feel” its paradigms, and I don’t have a good “feel” for what’s going on here. But I do think I’ll do some investigating, because I like that sort of thing, and I like Paradigm shifts, and also it would be nice to diversify my portfolio a bit.
CHK, ING, WTR
