Buy Gas Now
By Jeff Clark
March 22, 2007
There are a couple of times each year when you need to own natural gas stocks... and NOW is one of those times.
Natural gas stocks rally pretty consistently during the fourth quarter every year. We caught on to that trend last October and rode it for some pretty nice gains.
There's often a pretty good rally in the first half of the year too. The problem, though, is that the timing of that rally is inconsistent. Sometimes the rally starts in January. Sometimes it's February. Last year, the rally started in March. In 2005, it waited until May.
This year, the rally started yesterday.
As you can tell from the following chart, the Natural Gas Index celebrated the first day of spring by breaking out to the upside of a five-month consolidating-triangle pattern...
This is a very bullish technical development and quite likely signals the start of a rally that should last for the next couple of months, at least.
As nice as the technical pattern is, it's the fundamentals that make natural gas an attractive sector. Many of these stocks trade with single-digit P/E ratios, strong balance sheets, and huge operating margins.
The strong fundamental factors will limit the downside risk of these stocks. And the technical pattern signals the beginning of a new uptrend.
It doesn't get any better than this.
We hold two natural gas stock positions in the S&A Short Report portfolio. One trades at just four times earnings... and grew earnings and revenues last year by 96% and 43%, respectively. The other stock is trading at seven times earnings, has no debt, and holds 15% of its current market value in cash.
Yesterday's rally put them both solidly into the black – and there's plenty more to come.
If you participated in last October's natural gas rally, then you know how much money you can make as this rally unfolds over the next few months.
If you missed out on last October's rally, then you have another shot at it. Don't miss it this time.
Best regards and good trading,
Jeff Clark
