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Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 170,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.
|Company||Cheniere Energy (AMEX: LNG )|
|Stock Price At Recommendation:||$11.75|
Cheniere Energy Profile
|Star Rating (out of 5)||**|
|Industry||Liquefied natural gas|
|Market Cap||$766 million|
|Subsidiaries||Cheniere Energy Partners (AMEX: CQP )|
|Industry Peers||Dominion Resources (NYSE: D )
ConocoPhillips (NYSE: COP )
BG Group (PINK: BRGYY.PK)
Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
This Week's Pitch:
Cheniere Energy, Inc has been very volatile the last two years with some 50-100% short term swings. The foray up above ten has been a tough climb with hedge funds and Cheniere trading punches on how some debt is structured between Cheniere Energy and its affiliates. The debt load on Cheniere Energy held it back hard during the peak of the recession. I won't take a stand on the accounting disagreements. My current downthumb is based on the 17% spike Cheniere Energy had today, (I missed its peak near 25%).
The spike was a result of announcement that "U.S. Department of Energy's decision to grant a subsidiary of the natural gas company's general partnership authorization to export domestically produced liquefied natural gas."
Cheniere Energy would be the first one granted this ability, two other company's have pending applications. The approval is great news for Cheniere Energy, the problem I have is that the target date to refit the facility is 2015. While NG prices in the US remain about 40% below some other countries and the new methods to extract it from shale give the US a 100 year plus buffer, Cheniere is cash poor currently and the benefits will not occur quickly enough to support the share price rise. I expect a decay back down as the time to benefit sinks in. Another possibility is for Cheniere Energy to use the spike to do some dilutive stock issues.