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Now's a perfect time to buy into our favorite natural gas stock, as another part of the energy sector continues to slump...
You see, while energy stock bears point to the dismal performance of oil stocks as a reason to leave the sector entirely, they're wrong.
It's true oil stocks have been hit hard. Oil prices have tanked since June, down 21%. WTI and Brent crude both hit multi-year lows this month.
U.S. oil drillers like EOG Resources Inc. (Nasdaq: EOG) and Continental Resources Inc. (NYSE: CLR) have fared poorly despite surging production. Those two stocks are down 18% and 26% respectively from summer highs. Even Exxon Mobil Corp. (NYSE: XOM) stock is down 9% since June.
But while prices dip in the crude oil market, Money Morning's Global Energy Strategist Dr. Kent Moors predicts natural gas prices will climb as we reach the winter months.
"With natural gas, the NYMEX price was above $4 per 1,000 cubic feet (or million BTUs) in early October," Moors said. "As we move into a winter heating cycle, that should push prices closer to $4.50."
Natural gas at $4.50 would be an increase of nearly 23% from today's price of $3.65 per million BTUs.
Part of that price projection is based on higher demand. Supplies of natural gas have increased - just like oil - but the demand is a different story.
"What makes the gas picture different from oil are appreciable increases emerging on the demand side," Moors said. "From the rise of U.S. liquefied natural gas (LNG) exports to both Europe and Asia beginning in 2015 to the transition well underway from coal to gas in the generation of electricity, the ability to produce more unconventional gas is being met by a rise in the demand curve."
"There is a range of profitable moves about to hit," Moors continued. "Natural gas normally doesn't have the sizzle that crude oil has among investors. Of course, making money tends to change that real fast."
To find the best natural gas stock to buy now, it's best to look beyond the obvious choices...
Our Favorite Natural Gas Stock to Buy Now
A lot of investors look toward big names like Chevron Corp. (NYSE: CVX) when they pick energy stocks.
CVX is a $215 billion company and is active in the natural gas sector. According to the company, it produced 5.19 billion cubic feet per day in 2013. It's also involved with the production, liquefaction, shipping, and regasification of natural gas.
But that doesn't make it the best stock to buy now.
You see, Chevron is also a huge oil company. And the recent oil price pullback has weighed heavily on CVX stock.
Year to date, CVX is down 7.9%. More recently, it's dropped 14% from the 52-week high it set in July. CVX stock will continue to sputter as oil remains low.
Another natural gas play that Wall Street is quick to point out is the United States Natural Gas Fund LP (NYSE: UNG). Essentially, the fund tracks the spot price of natural gas. When prices rise, investors can find decent profits.
UNG is definitely a safe way to play a rise in natural gas. It will deliver some gains, but not the type of profits this stock can...
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