written by reader Natural Gas Price Trends?

By jmatthew3, March 13, 2013

Travis, what do you think about the natural gas price trend? Do you think we’re at the beginning of an uptrend? I’m interested in royalty trusts that pay out a dividend based on natural gas production (e.g., San Juan Basin Royalty Trust – SJT – as well as others).

The sector has been pretty beat up, but if gas prices really hit bottom at around 2 in early ’12, and we’re on an uptrend, it might be a good time to buy into some of these trusts.

Also interested on your thoughts on HCSG – Healthcare Services Group. I’ve made some really good money on it, and it seems to have a really great demographics-based story (food, laundry, janitorial services to nursing homes).

Curious on your take – thanks!

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.



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Anonymous Questions
March 14, 2013 11:14 am

HCSG sounds interesting from your description but I’ve never looked at them, will throw them on the pile for perusing in the future.

Natural gas seems to me like it’s going to be in a range for a long time — prices rise a bit when the more expensive wells are shut in, fall a bit when production is restarted, it’s a balancing act and down in this neighborhood it seems like future price expectations have finally been tempered so some of the land rush for natural gas acreage has gotten more sane, which means we’ll get to the point where explorers aren’t just drilling to keep their lease but are drilling to make money. I don’t think we’ll see $10 natural gas again unless inflation is out of control, but with current technology and shale plays the marginal producers can’t, from what I read, make a profit if it’s down around $2-3 or below, so I’d guess we’ll fluctuate mostly around $3-5 for the foreseeable future. Which isn’t all that foreseeable, frankly.

But I’m not at all an expert on energy economics, that’s just the assumption I work from.

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March 16, 2013 11:50 pm

Energy is sort of my thing. So are options. Have you considered using a cash-secured put selling strategy? If you are not familiar, visit the CBOE website on the strategy.
With natural gas prices likely to very slowly drift upward due to rig counts falling as companies try to control supply, some of the growth plays will likely do better than the income plays. I think this is especially true since once nat gas gets into the $4s there will be a lot of political pressure to hold the line. Thus, there will not be a lot of spill over to the trusts.
I love CHK on a sum of the parts analysis which I put at no less than $40/share and as high as $80/share over the balance of the decade. I have made it a “must own” at my newsletter and my advisory clients own it. Selling puts on dips (which you’ll get) will generate premium, which are high due to the perceived cyclical nature of commodity prices. CHK is refocusing now with Icahn on board. See there current investor presentation.

P.S. Travis, I don’t tease my picks. Is that a mistake? Is there anything I can do for a little gumshoe love? My “must own” stocks (Dec, Jan, Feb) since I started have been WLL, POT, CHK. What I can tell most folks is that most newsletters are more sizzle than steak. Hence, why I started one, not a lot of good competition. Love your work btw.

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