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How to Play Natural Gas Stocks
CNBC.com | December 06, 2011 | 06:30 PM EST

Natural gas companies have been trading more like oil stocks, rather than with natural gas futures — and “Fast Money” experts staked out ways to play the sector.

“You’re going to see a dislocation happen, probably in the next quarter or so,” trader Steve Grasso of Stuart Frankel said Tuesday.

Companies such as Comstock Resources, Carrizo Oil & Gas and Goodrich Petroleum, he said, could start to trade lower even with stabilization in the price of oil.

Grasso also noted that CRK saw its share price pop “because they’re buying more acreage — for oil.”

One way to play the sector: Avoidance.

Video: Oil, Gold Outlook for Wednesday

“Stay away from the mid-capitalized names,” he said. “Stay away from the lower-tier names because those are the ones that are going to get hit.”

Trader Joe Terranova struck a similar note.

“There has been a fundamental shift for a lot of these companies that were more focused on natural gas to get oilier,” he said. “These are names that are learning to live in an environment of $4 natural gas.”

Terranova said there were still some potential opportunities but issued one caveat: “Oil is still the trade.”

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