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Natural Gas Stock Trades That Look Past Low Prices
The Street | February 14, 2012 | 05:13 PM EST

The natural-gas stocks are hard to love these days, but there are still angles to be played.

Long-term investors point to optimism about the importance of U.S. natural gas supply in a global context in the years ahead, while short-term natural gas pricing weakness is also a way to identify contrarian bets.

The important thing is that an investor doesn’t have to know whether natural gas pricing sinks below its January low before going higher again, or if production cuts made by some of the biggest drillers, such as Chesapeake Energy, have a positive impact on pricing.

Here are ways to build a natural gas portfolio that doesn’t require a bet on a short-term pricing rebound.

1. Cheniere Energy

One-year return: 84 percent; 200-day moving average: $8.80; current share price: $15.17; 52-week high: $15.44

An investor can think of Cheniere Energy as part of a long-term secular narrative that is being supported by long-only investors.

Think of natural gas engine maker Westport Innovations, one of the few pure-plays on the buildout of natural-gas transportation infrastructure.

Cheniere, building the first government-approved natural gas export terminal in Louisiana, is the only pure play on the development of a U.S. natural gas export market. Weakness in natural gas pricing is actually a tailwind for Cheniere, as it continues to add support to the idea of exporting U.S. natural gas.

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