Why T. Boone Pickens Likes These Natural Gas Companies

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Legendary investor T. Boone Pickens has been called the Warren Buffett of energy investing, and over the years he has built up quite a legacy.

From his days as a wildcatter drilling in unknown oilfields, Pickens went on to start his own oil company, Mesa Energy, take on the likes of Exxon Mobil Corp. (NYSE: XOM), and manage a hedge fund, BP Capital.

As the head of Mesa, Pickens became known as a corporate raider, caught up in the deal-crazy days of the 80s. His first deal was to purchase energy company Hugoton Production Co. - a move made famous by the fact the company was 30 times the size of his own.

And today, at age 84, Pickens is still buying up energy stocks.

When you analyze his current top 10 holdings, it becomes clear natural gas companies are among his favorites.

We here at Money Morning certainly agree natural gas companies are primed to profit from the surge in U.S. natural gas production, largely a result of fracking, which has dramatically changed our country's energy outlook.

Less than 10 years ago, it was estimated that as much as 15% of our domestic gas would have to be imported in liquefied natural gas (LNG) form by 2020.

But now, the U.S. is projected to be a net exporter of gas by 2020, accounting for 9%-12% of global LNG trade.

And by 2040, U.S. consumption of natural gas is projected to rise more than 25% from 2010 levels, and domestic natural gas production is expected to climb more than 45% during the same period, Exxon Mobil said in a recent energy outlook.

So how do investors best tap into this trend?

Investing in Natural Gas Companies

Money Morning Global Investing Strategist Kent Moors urges investors to focus on companies with a proven track record that are involved in both gas and oil.

"Focus on the producers and service providers who are able to work in both oil and gas, both on the conventional and unconventional sides of both," Moors said. "The oil prospects are improving more quickly and this allows increasing commitment to gas without becoming dependent on natural gas, which is still a sluggish environment."

Even though the natural gas boom is in its early stages, there are clues as to which companies will emerge as winners.

"LNG may not be flowing in a major way for more than a year," Moors added. "But the huge multi-billion dollar, 20-year plus contracts for import are already being signed."

How Dr. Kent Moors Has Beaten T. Boone Pickens

Perhaps the best investment in the natural gas arena is Cheniere Energy Inc. (NYSE: LNG), which has inked several long-term contracts.

In fact, on Monday Cheniere announced a 20-year deal with British energy firm Centrica. And in December French energy company Total S.A. (NYSE ADR: TOT) agreed to purchase LNG from Cheniere for 20 years.

Under both contracts, Cheniere is to begin shipping LNG in 2018 from its Sabine Pass LNG terminal in Louisiana. Cheniere also has deals to supply LNG to companies in South Korea, India and Spain.

Pickens hasn't bought into Cheniere.

But Moors first recommended Cheniere to investors back in March 2011, when LNG was trading around $8 a share. It now trades at $28.

Golar LNG Ltd. (Nasdaq: GLNG), which owns and operates LNG carriers, is another example of Moors' success.

Moors first recommended this play back in June 2011 when the stock traded at $30. It's currently just under $37. That pick has moved up as much as 56% and is still up 23% for investors who didn't sell at the highs. Plus, it has paid investors a solid dividend, which now stands at 4.65%.

Pickens, on the other hand, initiated his GLNG position in the fourth quarter of 2011 at an average price near $44 and then exited the position in the second quarter of 2012 when the stock sold off at $32.

Obviously, Pickens has made some great picks as well. One of his largest holdings is up 75% since it was added to his portfolio.

But Moors once again beat Pickens to the punch, and has given his investors more than double Pickens' return on the same stock, netting 175% in gains so far. That's not even including dividends.

The good news for investors is that Moors thinks there's plenty of upside left in this high-flying stock. He even recommended it in a new report - "Seven Investments You Have to Make in 2013."

The other picks include a data-security stock that's poised for a possible 55% gain - and could end up as a takeover play - and a biotech stock that's suddenly being accumulated by the CEO - as well as by a big outside shareholder.

Here's how you can get all seven picks, and find out the natural gas company that delivered a 175% gain.

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