|
Published: November 4, 2010
Last month, I showed
you it's possible to make 1,000% as a "hoarder."
As shareholders of Seabridge Gold learned recently, this
strategy - of buying hated, cheap resource assets in
anticipation of higher prices - can result in astounding,
ten-bagger gains.
We need to know all about "hoarding" right now because a similar
situation may be setting up in the natural gas business. Natural
gas prices - and natural gas stock prices - are in the basement
right now. New drilling technologies have brought on a ton of
new supply... but emerging demand for power generation and
transportation could double gas prices in the coming years.
That's why it's time to start learning how to hoard "PUDs."
PUD stands for "Proven
Undeveloped Reserves." These are undeveloped gas wells with zero
exploration risk. Firms aren't extracting the gas, because
prices are so low. Typically, PUDs are located in the middle of
proven fields just waiting to be drilled.
Right now, the stock market is offering incredibly cheap PUDs.
The price of natural gas is so low, investors aren't willing to
pay much at all for future production of PUDs. Companies only
receive stock market value for their current productions and
cash flows... So promising properties are selling for peanuts.
There's zero investor interest in the stuff. Everybody thinks
natural gas is dead.
We have a "Steve Sjuggerud" situation developing here. These
assets are hated... they're cheap... But we don't yet have an
uptrend in natural gas and natural gas stocks. It's early in
this game - but not too early to start doing our homework.
So let's check out some ideas on locating cheap PUDs...
Below is a table of natural gas producers that trade on the
stock market. I figured out the price of each company's PUDs per
share, in thousand cubic feet (MCF) equivalent increments. We
want to buy massive amounts of PUDs as cheaply as possible.
|
 |
This is a broad-brush approach,
based on the price of the natural gas in the ground. (We didn't
factor in debts, for example.) It gets us a rough idea of where
to find values in gas.
That's the first step in putting together a portfolio that could
return you 1,000% as natural gas prices emerge from this
downturn.
I'm convinced natural gas will be a huge bull market in a few
years. In a future essay, I'll dig deeper into some of these
companies... I'll identify the best operators in the best
regions of North America. I'll also show you how electrical and
transportation demand could send their shares up hundreds -
maybe thousands - of percent in the coming years. Stay tuned...
-- Matt Badiali
Editor
The S&A Resource Report
Note: This article originally appeared on
Daily Wealth |
