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Why I Like Smaller Natural Gas Stocks Right Now …

 March 19, 2012 01:11 PM

U.S. natural gas prices are currently trading near ten-year lows. And while most investors think that makes natural gas stocks a bad bet right now, they couldn't be more wrong!

In fact, along with select small-cap oil companies, I believe smaller natural gas companies are a screaming buy right now.

For starters, I expect natural gas prices to rebound from here — in oil terms, the commodity is trading at just $14 a barrel right now!

But what's more important to understand is that there is a world of difference between the underlying commodity and the companies that are involved with producing it, transporting it, and finding new ways to capitalize on its current affordability.

[Related -Boost Your Dividend Yield]

Foreign investors and governments certainly recognize this! That's why they're not waiting around — they're already pouring money into the American oil & gas industry hand over fist — spending more than $37 billion just in the third quarter of last year alone!

They're funding every new project they can get their hands on. They're looking to lock down supplies of cheap, America oil and gas for decades to come. And they're snatching up every promising small energy company they can find.

This flood of foreign cash is already driving some lesser-known energy investments through the roof, and it's even spilling over into neighboring Canada … where — since 2009 — China's state-owned oil companies have invested $16 billion in new forms of fuel like shale oil and gas.

This is the real, concrete proof of the "New Fuel Revolution" I've been telling you so much about lately.


[Related -Chevron (CVX): The Second Biggest Oil Seeker Joins The Dividend Yield Passive Income Portfolio]

Okay, But Why Favor SMALLER Energy Stocks Specifically?

Well first off, countries like China aren't putting their money in "big oil" companies like Exxon or BP. Instead, they're investing billions of dollars in small-cap natural gas companies that have decades of profit potential.

These companies are on the cutting edge in terms of technologies and new techniques … just as it's always been the smaller Internet companies that redefine our experience of the Web.

And with billions in fresh investment from foreign countries, these eager little companies are poised to make the very most out of a transition in global energy standards.

Plus, from our perspective as investors, it doesn't take much to move smaller stocks. In fact, a single new innovation or just one new discovery could send a small cap soaring!

Alon U.S. Energy Partners is a great example of what I'm talking about.

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