Dan Dicker's Favorite Natural Gas Stocks

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Includes: CHK, COP, CQP, DVN, EOG, NFX, SWN
by: Insider Monkey

Dan Dicker, prominent energy market expert and senior contributor for thestreet.com, has been a floor trader at the New York Mercantile Exchange for more than 20 years and is a licensed commodities trade advisor.

Last November, in an article for The Street, Dicker declared that 2011 will be the year of natural gas and named his six favorite natural gas stocks. Year-to-date Dicker’s six picks have gained 8% on average versus a 5.9% gain for the S&P 500 (NYSEARCA:SPY). Four of Dicker's picks managed to beat the market. During the same period, gold (NYSEARCA:GLD) gained 5.7%.

It may be early to declare 2011 the year of natural gas; however, Dicker’s portfolio seems to be doing well so far. Here are brief analyses and year to date performances of his favorite natural gas stocks.

  1. Newfield Resources (NYSE:NFX): In fiscal 2010, NFX reported total revenues of $1.9 billion, an increase of 46% compared with a year ago. Annual net income was $523 million in FY 2010. NFX recently traded at $72.11 and gained 0.7% since the end of last year. The stock has a market cap of $9.5 billion and a P/E ratio of 18.56.
  2. Conoco-Phillips (NYSE:COP): In fiscal 2010, COP reported total revenues of $189.7 billion an increase of 26.6 % compared to 2009. Annual net income was $ 11.42 billion in fiscal 2010. COP recently traded at $79.97 and has a 3.38% dividend yield. COP gained 17.4% so far in 2011. The stock has a market cap of $113.8 billion and a P/E ratio of 10.48. COP is owned by 20 of the 175 hedge funds we follow. Warren Buffett had nearly $2 billion invested in this stock at the end of December, followed by Bill Miller’s $230 million.
  3. Devon (NYSE:DVN): In fiscal 2010, DVN reported total revenues of $9.1 billion, an increase of 19.7 % compared to 2009. Annual net income was $ 2.33 billion in fiscal 2010. DVN recently traded at $88.65 and has a 0.78% dividend yield. DVN gained 12.9% since the end of 2010. The stock has a market cap of $37.1 billion and a P/E ratio of 8.56. DVN is one of the commodity stocks loved by hedge funds. There were 21 prominent hedge funds with DVN positions at the end of December.
  4. EOG Resources (NYSE:EOG): In fiscal 2010, EOG reported total revenues of $6.1 billion, an increase of 27.3 % compared to 2009. Annual net income was $160 million in fiscal 2010. EOG recently traded at $111.37 and gained 21.8% year-to-date. The stock has a market cap of $27.8 billion and a P/E ratio of 177.27. EOG is one of Jim Cramer’s most favorite stocks. Richard Chilton has the largest position in EOG among hedge fund managers.
  5. Southwestern Energy (NYSE:SWN): In fiscal 2010, SWN reported total revenues of $2.6 billion, an increase of 21 % compared to 2009. Annual net income was $604 million in fiscal 2010. SWN recently traded at $40.57 and gained 8.4% since the end of 2010. The stock has a market cap of $13.88 billion and a P/E ratio of 23.47. Chilton also has the largest position in SWN among hedge fund managers.
  6. Cheniere Energy (NYSEMKT:CQP): In fiscal 2010, CQP reported total revenues of $399 million, a decrease of 4 % compared to 2009. Annual net income was $107 million in fiscal 2010. CQP recently traded at $18.16 and lost 13.1% since the end of 2010. The stock has a market cap of $13.88 billion and a P/E ratio of 28.39. Hedge funds didn’t have any significant long positions in CQP.

Dicker seems right on target with his sector pick. We like natural gas companies as well. Our favorite pick is Chesapeake Energy (NYSE:CHK). Carl Icahn built a massive position at the end of last year. On December 20, he revealed his 5.8% stake in CHK and it immediately jumped 3%. If you had bought CHK the next trading day at the close, your return would have been 28.5% in less than four months.

Disclosure: I am long CHK.