3 Incredible Natural Gas Stocks You Can Buy Today

This video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith discusses topics around the investing world.

If 2011 was the year of dividends, then 2012 is the year of natural gas. The energy supply is swirling as one of the hottest investing sectors right now. For those interested in adding a natural gas component to their portfolio, Austin outlines three great stocks with a huge amount of growth ahead of them. Each company is involved in a different part of the natural gas fuel supply chain, and they all benefit in tangent to each other. If you're bullish on the future of natural gas, you don't want to miss out on these great picks

These three companies are great ways to play the natural gas sector, but that is just one segment of the whole energy industry. If you'd rather pick up just one energy stock that's poised to benefit as oil prices rise, you should read our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report -- it's totally free.

Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Clean Energy Fuels, Cummins, Ford, and Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 25, 2012, at 2:46 PM, DirkHolthusen wrote:

    I'm disappointed in this article (video.) Firstly, the information is dated. All three stocks have had quite a "run-up" and in fact have temporarily peaked and backed off in price. The question now remains "is this a buying opportunity?" The stocks mentioned have great potential, but I would like to have seen an analysis as to future earnings & stock pricing versus current debt and market capitalization. I'm an Engineer without a strong financial background and could use the help.

    Secondly, the description of Cheniere Energy (LNG) is wrong. This company is years away from production of LNG. Cheniere was originally opened last summer as the USA's newest LNG receiving & regasification terminal. Timing could not have been worse as Nat gas prices were clearly bottoming, however the facility was planned & developed several years ago when nat gas was selling at $14 to $16 per mmcft (not the current $2.50.) In fact the interest in Cheniere is based on the planned reversal of the entire project. Contracts have been signed for the construction of 4 large LNG Trains with contracted amounts to be delivered to Global buyers. Last year, Cheniere was the first Company to have received FERC approval for shipment of LNG.

    Finally, while all three stocks are reliant on low Natural Gas pricing, Cheniere is in a different market segment. Cheniere is planning to be a primary exporter of LNG to Global consumers, whereas CLNE & WPRT are involved in North American transport fueling and engine design.

    These are incredible stocks, but whether you should buy them today, at current pricing, is not answered by this article.

  • Report this Comment On March 26, 2012, at 5:16 PM, MIBS982 wrote:

    This is truly one of the most atrocious pieces of journalism I have seen in a long while. The journalist clearly knows absolutely nothing about Cheniere Energy and their overall business, the struggles they have gone through in recent years and the path they are on today.

    Key points are mentioned by the other comment prior to mine. I'd reinforce those points.

    To think that anybody might be taking investing advice on the basis of such poorly informed junk journalism as this is scary.

  • Report this Comment On March 26, 2012, at 8:46 PM, DirkHolthusen wrote:

    Thank you, I really had toned my respose down. Since the author has not had the courtesy to respond, I'm thankful you are telling it like it is. I think Motley Fool should be ashamed at this shoddy piece of writing and pull the article!

    Geez! How hard is it to read a 5 minutes of a Reuters, Hoovers, or the Company Web site to at least understand a Company's operation.

  • Report this Comment On March 26, 2012, at 10:22 PM, TMFBWItime wrote:

    @MIBS982 & DirkHolthusen

    You are both correct that the speculation surrounding Cheniere is with regard to their role as a natural gas exporter.

    You'll note that I specifically call out their international potential at 2:25

    Do you not agree that their position as a LNG leader does not also make the domestic transport of natural gas easier?

  • Report this Comment On March 27, 2012, at 6:41 AM, DirkHolthusen wrote:

    Your piece leads one to mistakenly believe there are synergies between the 3 stocks. LNG is years away from being a leader in anything involving natural gas and there are no complementary operations with WPRT or CLNE,

    Manufacture & transport of Liquid Nat Gas to local distribution stations is a totally different operation from the planned large scale Global export plans at Cheniere. Distribution of cng and lng on a domestic basis will be provided by Trucks from existing (smaller) Gas plants located throughout the Country

    Cheniere is not producing LNG, but is planning the construction of 4 large lng trains (earliest completion is scheduled for 2016.) In fact LNG is still awaiting final approval from federal regulators before they continue construction.

    Given the fact that Southern, BG, Dominion and Sempra are also seeking government approval to export natural gas, Cheniere's plans may still be in jeopardy. The Government now appears nervous about future supply demand (pricing) if they grant multiple Export licenses. (Actually the US has more than enough Nat Gas reserves to meet domestic and global demands but only if the E&P Companies are given the freedom to drill & frac on an expanded basis. The current administration may not want to create this environment.)

  • Report this Comment On March 27, 2012, at 7:42 AM, DirkHolthusen wrote:

    When I read (or view) a recommendation involving investment in a Company, I do not expect to “fact check” the information. Cheniere IS NOT an LNG leader.

    Your piece leads one to mistakenly believe there are synergies between the 3 stocks. There are no complementary operations with WPRT or CLNE, and LNG is years away from being a leader in anything involving natural gas.

    Manufacture & transport of Liquid Nat Gas to local distribution stations is a totally different operation from the planned large scale Global Export plans at Cheniere. Distribution of cng and lng on a domestic basis will be provided via Trucking by existing (smaller) Gas plants located throughout the Country.

    Cheniere is planning the construction of 4 large liquid natural gas trains but is years away from producing any lng (earliest completion is scheduled for 2016.) In fact LNG is still awaiting final approval from federal regulators before they continue construction.

    Investment in LNG has above normal Political Risk. Given the fact that Southern, BG, Dominion and Sempra are also seeking government approval to export natural gas, Cheniere's plans may still be in jeopardy. The Government now appears nervous about future supply demand (pricing) if they grant multiple Export licenses. (Actually the US has more than enough Nat Gas reserves to meet domestic and global demands but only if the E&P Companies are given the freedom to drill & frac on an expanded basis. The current administration may not want to create this environment.) LNG may be first in line for approval to export Nat Gas, but this is not a guarantee of approval.

  • Report this Comment On March 28, 2012, at 7:59 PM, MIBS982 wrote:

    Cheniere currently plays no role whatsoever in the domestic movement of natural gas. Their current asset base consists of an LNG receiving terminal and a pipeline to move gas out from that terminal. At this point, the receiving terminal is an albatross. LNG is not arriving at the terminal and not moving through the pipeline because LNG import in the Gulf Coast is no longer necessary.

    When Sabine Pass was first developed, Cheniere had a sound business plan built around selling import capacity on a long-term basis and they entered into agreements with Total and Chevron to that end. Both TOT and CVX make large monthly payments that are predictable and consistent. In that sense, Cheniere was building an infrastructure type model.

    Then, they got overly giddy about the US potential for LNG import and they decided to double the size of the terminal and retain the additional capacity for themselves. This was a very risky step out from their base model and, as it turns out, was a failure. We all know what happened to the domestic gas market. LNG import is dead. The only time Sabine Pass is put to use now is when a cargo is brought in for storage and re-export purposes. This generates little, if any, revenue for Cheniere and does not involve the movement of domestic gas.

    So, as it stands today the statement around Cheniere playing a key role in the movement of domestic gas is incorrect. If Cheniere is successful in developing an export terminal, which still remains a risk then it gets back into the gas business. It won't be moving gas around the US, it will be moving gas out of the US.

    Cheniere appears to have learned a lesson from the import debacle, and its signed contracts for export are very different from traditional export contracts. From Cheniere's standpoint, they are infrastructure contracts built around a use-or-pay infrastructure fee. The variable component, linked to Henry Hub, will basically be pass-through. Cheniere's income will be predictable and not linked to international LNG prices.

    From there, it is critical to understand the difference between CQP and LNG stocks, which is something that always creates confusion for investors. Most are going into LNG. The terminal projects are actually owned by CQP. LNG profits are driven by its ownership in CQP. LNG's ownership in CQP is continually decreasing through issuance of new LNG shares, issuance of new CQP shares, etc. There is a valuation of LNG making the rounds now that says the stock is already overpriced.

    What it boils down to, however, is stating that Cheniere plays an important role in domestic gas movements is false. Recommending Cheniere stock without getting into the risk issues and the ownership issues (how does cash flow through the business and how does that impact equity holders and stock value) does no favor to investors, most of whom have no understanding of the business, no understanding of the contract structure and no understanding of how cash will flow through the business.

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