Pipe Dreams: Is Cheniere Energy Inc’s Stock Gased?

Trading reliance on Russian gas with newly exported gas from the States may not be the solution Europe needs.

Apr 10, 2014 at 4:24PM

Shares of Cheniere Energy (NYSEMKT:LNG) have risen exponentially (2,650%) over the past four years and nearly 50% year to date alone as the allure of using liquefied natural gas (LNG) has been amplified around the world while the potential for the U.S. to export natural gas has become more of a mainstream conversation. The problem is that lawmakers have not formally blessed the idea of sending LNG abroad as pollution and concerns about lifting prices here at home fuel the debate.

At present, the U.S. is considering fast-tracking LNG buildouts as a move to hit Russia in the wallet, though currently we only send limited amounts of gas to Canada and Mexico. While there could be more upside in shares of Cheniere Energy, the bet that legislators will give gas exports the green light does seem already baked into the Texas-based energy company's stock. 

I do still believe in the longevity of Cheniere and the ability for the company to create value for shareholders, as evidenced by the spinning off of Cheniere Energy Partners LP Holdings (NYSEMKT:CQH)  This is supported by the 20-year purchase agreements from Pertamina announced in December and more recently the agreements with Endesa, which is part of the Enel Group. However, I believe that the country going from a gas importer to a staunch exporter needs to be more closely evaluated by the Federal Energy Regulatory Commission (FERC). I also feel the general stock market is due for a correction, and shares of Cheniere Energy will not be immune to any market sell-off.

More importantly, Europe needs to fix its own energy problem and not look to swap dependence on Russian gas with a new, perhaps stronger dependence on U.S. energy supplies. This means that shares of Cheniere Energy may doubly be due for a pullback, so investors considering going long should really consider the move before jumping on the export bandwagon. With that being said, I wouldn't be surprised to see management look to take advantage of the recent uptrend in its shares and announce a 2:1 stock split to attract new investors. 

My enthusiasm for shares of Cheniere Energy at present valuation has certainly waned. Therefore I'm more inclined to believe the real alpha for those interested in global LNG may actually come from the engineering technology to build new LNG terminals and make them more efficient. 

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John Licata has no position in any stocks mentioned. The Motley Fool owns shares of Fluor. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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