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The Next Big North American Energy TrendBy Frank Curzio, editor, Small Stock SpecialistFriday, April 8, 2011 Over the past two months, I've talked about several ways to profit from the megatrend taking place in the natural gas industry...
Small-cap producers working in "unconventional" gas fields are getting snapped up by Big Oil companies looking to expand their reserves. I introduced three of these stocks to my Penny Stock Specialist subscribers. They're up an average of 30% in less than 60 days.
And last week, I recommended Clean Energy Fuels (CLNE) and Westport Innovations (WPRT) as ways to play the coming infrastructure boom in natural gas.
Clean Energy Fuels builds natural gas fueling stations. It operates hundreds of these gas stations across the U.S. Westport is one of the few companies in the world to make auto engines that run on natural gas. It has a partnership with three of the largest engine manufacturing companies in the world – including Cummins.
As you can see from the chart below, these two stocks have popped even in the last week. This was a direct response to our government's recent efforts to push for more natural gas use in heavy-duty trucks.
 If you missed out on my favorite producers, or even on the stocks I talked about last week, don't worry. There's another interesting way for investors to make huge returns on this booming industry...
More energy companies are using hydraulic fracturing ("fracking") as a way to increase natural gas production. Fracking uses high-pressure fluids to force the layers of rock apart so companies can pump out the oil and gas trapped inside.
This technology requires massive amounts of water. With the amount of fracking taking place in shale regions across the U.S. and Canada, water supply and water treatment are becoming significant issues. According to industry sources, over 3 million gallons of water are used for each "fracked" well. In Canada alone, more than 12,000 wells are expected to be drilled in 2011. That's an enormous amount of water.
This water also gets contaminated with chemicals and solutions used during the fracking process. In other words, not only do you need fresh water delivery to drill new wells, but the water must be treated and disposed of, too.
There are only a handful of companies that set up water storage facilities and water transportation services for large corporations. One is called Pico Holdings (PICO).
Pico finds ways to develop new sources of water for utility and natural gas companies. It also develops storage facilities that help allocate available water supply. The company operates mostly in the southwest U.S. – or where water resources are limited. The stock is trading off its 52-week high, has a strong balance sheet, and is 80% held by insiders.
I believe companies like Pico present investors with a great opportunity to make big money over the next few years. And I'm not the only one who sees significant value in water infrastructure stocks...
At a mining conference in Toronto last month, I got a chance to speak with legendary mining investor Rick Rule. Rick has over 35 years of experience investing in commodities. He's made millions of dollars for his clients.
One of his favorite investments right now is water. He says the oil and gas industry has been "woefully deficient" in recycling treatment water. It's just a matter of time before this industry will have to deal with the issue. Based on Rick's track record, I wouldn't bet against him.
Water treatment and delivery for oil and gas companies is one of the few undervalued areas in today's market. With the amount of drilling expected to take place over the next five to 10 years, profits for these companies should skyrocket. I wouldn't wait long to buy into this industry.
Good investing,
Frank Curzio
Further Reading:
Last week, Frank told Growth Stock Wire readers about a pair of energy stocks ready to pop. He nailed the timing. In just five days of trading, one of these stocks is up 5.5%. The other is up over 13.5%. And even better, Frank says "these natural gas plays have huge long-term potential." Don't miss out: Two Small Energy Stocks with Huge Potential.
Big Oil has been spotted spending billions of dollars on natural gas. "To put these deals in perspective, imagine Google, Microsoft, Apple, Cisco, and IBM invested billions of dollars in companies producing a particular technology within an 18-month period," Frank writes. "Chances are, every stock within that sector would skyrocket." Learn more here: How to Get in on the Ground Floor of the Coming Energy Megatrend.
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