Let me share with you three disparate items from my news clip
file that, taken together, point to game-changing opportunities for
one of our topcommodity plays...
Item #1: Smog is alive and well.
Even after years of progress, air quality in Los Angeles is
still poorer than most of the United States. Much of the blame goes
to the area's two major seaports (Los Angeles and Long Beach),
where massive cargo ships spew fumes as they chug into the harbor.
Tocompound the air quality problem, the freight trains that carry
the cargo inland run on polluting diesel engines, as coughing
residents along the route can attest.
Help is on the way. The city of Los Angeles is installing new
battery packs at its ports to enable cargo ships to operate with
their engines turned off. Even the regional commuter rail system is
getting in on the act: Southern California's Metrolink announced in
December that itwill install new, clean-burning locomotive engines.
Tucked into the legislation was a subtle mention that the transit
system will also test "various alternative fuel technologies
expected to be commercially available in the next decade. These
technologies include, but are not limited to, liquefied natural gas
) and battery technology."
Item #2: Sharing the wealth.
Much has been written about the United States' surging energy
production, which could eventually make the world's largesteconomy
energy-independent. Some pundits and politicians are of the opinion
that Uncle Sam should keep to himself every drop of oil and gas
that's pumped out of U.S. soil. Exporting the country's fossil
fuels, they argue, will ultimately lead to higher energy prices and
derail the new era of low-cost natural gas before it barely has a
chance to begin.
Last month, the U.S. Department of Energy finally received a
long-awaited study by a private consulting firm that looked at the
economic impact of liquefied natural gas (
You can read the full report byfacility to come online in the
U.S. Gulf Coast in the next couple years. More are sure to
In fact, the consultant surmised, the larger the level of
exports, the bigger the benefits: "Scenarios with unlimited exports
always had higher net economic benefits than corresponding cases
with limited exports."
So much for the argument that gas exports would harm the U.S.
economy. And it likely paves the way for a surge in LNG exports in
the next half-decade.
Item # 3: Shut down the dirty plants.
This energy source is so 1800s. In November 2012, the non-profit
Union of Concerned Scientists released a report on coal-fired power
plants. They looked at every power plant in our nation's energy
system, and concluded that many older coal-fired plants will likely
be shut down. Why? It would cost too much to upgrade the plants to
meet increasingly stringent environmental standards.
The scientists found that such plants represent 59 GigaWatts
(GW) of electricity, or 6% of the nation's electricity output.
That's on top of the 41 GW worth of output that the utility
industry has already earmarked to mothball.
Where will the nation turn to make up for this lost energy?
Natural gas. This abundant fossil fuel has seen its share of the
electricity-generationmarket rise to 35% from 25% during the past
decade. That trend is sure to continue.
The cat's out of the bag: Increasingly abundant natural gas is
playing a more dominant role in the U.S. economy. What's less well
known, however, is how individual investors can potentiallyprofit
from this trend. For more on that, let's turn to Andy
Obermueller,market strategist forStocks ...
You'll learn the name of one of Andy's favorite natural gas plays
in the interview that follows. For a sneak preview of a
presentation in which Andy talks about some of the other
opportunities in the natural gas space, follow this link. The
presentation will be released to the public on Saturday.)
What qualifies natural gas a game-changer by your definition?
Utilizing natural gas in a meaningful way in our national energy
strategy is the equivalent of discovering a whole new color -- no
exaggeration. It changes everything.
A game-changer is a technology, innovation or trend that
materially alters the baseline assumption for doing business within
an industry. Thereafter the question is one of scale: Is the
industry large enough that such a major change will affect the
value of the companies that are positioned to ride the trend? Well,
here, the answer is a resounding yes. Widescale use of natural gas
changes everything. Electricity. Automobiles. Chemicals.
Residential construction. And, by extension, all of the industries
that feed into or otherwise support natural gas. It's huge. It's
here. It's happening now.
And the processes that make this all possible are themselves
game-changers. It's impossible to overstate the importance of
fracking and horizontal drilling in the fossil fuel space. Broader
access to shale formations -- which contain scads of oil -- is
producing an amazing quantity of gas. This rock is basically like a
big sponge: breaking the rock -- that's the fracking part --
squeezes oil out. And gas flows out, too, just like bubbles come up
when you open a can of soda. And the ability to drill horizontally
exponentially increases that access.
But a key thing to remember is that horizontal drilling is
relatively new. Most wells are still conventional. As this becomes
mainstream -- and it is a long way from that -- but as it becomes
mainstream we will not only see alot more domestic oil but even
more natural gas.
What types of companies stand to profit most from the natural gas
In any commodity play, the natural tendency is to look to the
producers. I tend to look elsewhere. Natural gas is a commodity --
one thousand cubic feet of methane is as good as the next thousand
cubic feet of methane. But if you can do something to add value to
a commodity, you've usually got a winner. That's why
Tiffany & Co. (
has outperformed most mining companies, and for a very long time.
That's not to say that the best producers can't be
decentinvestments . But to capture the really big gains, investors
in this space are going to have to look for a value add of some
StreetAuthority just published an extensive report that includes
detailed write-ups of some of the most promising companies in the
natural gas space. Can you tell us about some of them?
Subscribers toBuy and Hold for the Next 100 Years" -- by
One of the companies is an infrastructure play -- without this
company's assets, which they went to a lot of trouble and expense
to build, the United States can't export so much as a Thermos
bottle full ofliquid natural gas. So it has a lock on a pretty good
Another company makes natural gas-fired engines. These are for
large heavy-use vehicles like semis and for light trucks like my
beloved Dodge Ram. You can go down to the Ford place today and
order a natural-gas powered pickup, and next year you can get a
Silverado or Sierra from GM. These are the same trucks America
loves and they're fueled by good old American fuel. You can write
the commercials in your sleep. And that's before you consider that
natural gas is a faction of the cost of diesel but can deliver the
same horsepower. This company is in the catbird seat.
Another of the companies is actually getting this fuel to retail
customers -- putting it in the pumps. The Energy Secretary is
pushing this, and industry is clamoring for it. It's not
necessarily high tech, it's just getting enough natural gas pumps
and tanks in place so that John and Jane Q. Public can drive from
Boston to Austin without worrying about where they are going to
Will you name a favorite?
I hate to give this pick away -- it's so good. One of the companies
I like best is an engine maker, a Canadian company called
Westport Innovations (Nasdaq: WPRT)
. I've seen it display its technology to some very skeptical crowds
at trucking industry trade shows, and in every case it stole the
show. Drivers and fleet owners were lining up to try to figure out
how to fold these vehicles into their fleets. It's no mystery as to
why: If I showed you a car that had the performance characteristics
of a tier one product -- a Ford 150, say, or a Cadillac CTS -- and
then told you it ran on fuel that cost less than half the price of
gasoline... well, I think my order book would fill up pretty fast.
That's why I like Westport. It has deals with every manufacturer
you can name -- and a few heavy equipment makers that are probably
unfamiliar to you but no less important on a global scale. This is
a quiet revolution, but I expect some pretty raucous profits.
For more information about
and a more detailed discussion of theinvestment opportunities in
natural gas, special premium report, "America Will Run on Natural
Gas: Seven Companies to Buy and Hold for the Next 100 Years."
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