Our focus this summer remains on building positions in the bombed-out natural gas market; there’s no other commodity this depressed, this unwanted and trading at such distressed levels, according to Eric Roseman.
In his industry-leading, The Commodity Trend Alert, the resource expert explains, "Indeed, the bombed-out natural gas sector is screaming 'buy'." Here, he looks at TransCanada Corp. (NYSE: ).
'The way prices have been heading over the last several months you’d think the world doesn’t use this clean-burning fossil fuel anymore," Roseman said.
'Natural gas prices remain 70% off their 52-week high and more than 75% below their all-time highs almost four years ago when Hurricane Katrina smashed the Gulf of Mexico," he added.
Historically, the oil-to-gas ratio signals a major buy signal for natural gas with the spread or difference between crude oil to gas at 17.5. That’s a huge spread, according to him.
'Our newest portfolio position in this sector is North America’s largest natural gas pipeline operator – TransCanada. Based in Calgary, Alberta, TransCanada owns 36,500 miles of natural gas pipelines – most of which transport gas from Alberta to the eastern United States and Canada," Roseman said.
'Roughly 50% of all the natural gas produced in western Canada is brought to market vis-à-vis TransCanada pipeline. The company also generates a significant chunk of its revenues from wholesale power generation," he said.
Basically, this is one big company that is a powerhouse in Alberta. If you’re moving natural gas through a pipeline up there, then the odds are pretty good you’ll use TRP, according to Roseman.
'What I like about TRP is that the pipeline business is stable and dependable. Gross margins and operating income have consistently improved this decade and the dividend has grown by more than 25% over the last ten years," Roseman said.
'The company is also nearing the completion of its first phase of the Keystone pipeline – a $12 billion dollar project that will eventually carry 1.1 million barrels of oil sands crude a day from Alberta to refineries in the U.S. Midwest and Gulf Coast," he said.
In a tough global economy TransCanada Corp. serves as a blue-chip stock TransCanada Corp. currently trades 31% off its 52-week high of $39.31 and 37% below its all-time high last fall before the September-October global crash, according to Roseman.
'The stock trades at 13.9 times trailing earnings, pays a fat 4.9% dividend in Canadian dollars and will rally sharply once depressed natural gas prices get off the ground. This is a great stock for all investors," Roseman said.
