Why I'm Buying Cabot Oil & Gas

I want to build a mini basket of a few natural gas companies, as I've done with fertilizer and coal. We first started noticing the relative strength across this entire sector about a month ago [Feb 11: An Interesting Development in Natural Gas], but I wanted to do more homework on the group as I have not invested in any of these names for close to 3 years. I still like coal more due to its potential to be exported, but it appears as more coal is sent offshore this has pushed up demand for natural gas. 

My main fear of the natural gas trade is slowing US economy will hurt it, and since it is not easily transportable like coal can be, it is levered far more to the domestic situation. That said, the price action in the stocks of late is hard to argue with, so I am going to begin exposure here and then watch how things develop.

Of interest are EOG Resources (EOG), Chesapeake Energy (CHK), Cimarex (XEC), Southwestern Energy (SWN), and a few others. I'll probably stick with 2-3 names and simply have a group of 5-6 on a watch list, and I am waiting to see which ones hit my price targets first. I do want EOG, with their recent discoveries, in the portfolio badly. Today I am beginning with Cabot Oil & Gas (COG), as it has fallen nicely to its 20 day moving average and is down 9% .

I started with a primer position of 1.2% or 250 shares right near $49. I would like to expand this position if/when the stock falls to its 50 day moving average below $46. We'll see if that happens as these stocks have shown incredible relative strength of late - staying flat in all this market turmoil.

Most of the other names have not fallen that much (ex SWN), but I want to buy the strongest charts when they falter in a general market selloff. Cabot Oil & Gas is one of those names that provided an opportunity on Monday. (could have bought it for a similar price in past 2 weeks of course, but wanted to see how this group reacted in the anticipated sell off)
Disclosure: Long Cabot Oil & Gas in fund; no personal position

Comments

[norway:]

Hi.

Anyone have some news about Nornew?

Operating in the Marcellus play near Hamilton.

Norway

2008 Mar 18 10:14 PM