I was focused on writing the 4th issue for subscribers, due out the second week of September, but I came across a research article I wanted to share with readers.
Martin King, an energy analyst at First Energy in Calgary is the latest to trot out the “it’s-darkest-before-the-dawn-buy-natural-gas-stocks-now” theme, in a 5 page note on August 31. I’ll tell you about his key points in a minute.
But first, I want to say this guy has a track record that I follow. Back on February 19 of this year, he put out a similar research note on natural gas stocks that was uncannily accurate. Just like now, sentiment for natural gas stocks was very low, and he stuck his neck out saying it’s time to be a contrarian and buy.
And natural gas stocks did have a strong spring – much stronger than I anticipated. Investors following Mr. King’s thesis made good money through the spring, as the Amex Natural Gas Index went from 300 to 480 over the next 3 months, and Canadian natural gas stocks bottomed within 10-14 days of his call, and had a great spring. Both the index and many stocks jumped 50% or more in the next 3 months.
So this man has my attention. I am now going to introduce a natural gas stock to subscribers in my next issue.
On the supply side, King says producer shut-ins will be huge, lowering supply. The new shale gas and unconventional plays will not make up for the natural declines in conventional North American gas production.
On the demand side, he says there is a possibility of a record natural gas withdrawal from storage this winter season. And any pick-up in industrial demand could have a dramatic impact on storage, he adds.
While he is calling for higher natural gas prices than most people for next year, he does expect gas to hit the low $1 range in Canada and low $2 range in the US before the end of October. That is the time to be buying natural gas stocks, he says.
His arguments are similar to what both Tristone Capital out of Calgary and Sanford Bernstein & Sons Co. out of New York have said recently.
After looking at the many factors surrounding natural gas, everybody is looking into their crystal ball and guessing at future prices. I will be telling subscribers in my next issue what some of my favourite natural gas stocks are in case Mr. King, Tristone and Bernstein are correct.