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  • Two Exciting Plays In Natural Gas 0 comments
    Mar 5, 2013 12:46 PM | about stocks: MIND, MTRX

    Recent happenings in the energy sector have revealed a quiet revolution that has been reshaping the oil and gas industries in the United States and totally changing the way energy stocks are trading. Currently, there is a growing expectation among investors and analysts of what the future holds for natural gas. In my eyes, natural gas is extremely depressed and cheap investments like these are few and far between. With many new sources of shale gas being found in the last couple of years it is no wonder natural gas has fallen of late, however, countries are increasingly switching to this cheaper and cleaner energy source to meet their ever growing needs.

    With President Obama already saying that he is open to exporting, there is great opportunity for companies to benefit from the exporting process as well as the eventual boom in prices Furthermore, aggressive monetary policy around the world continues to create a strong argument for commodities. With quantitative easing and asset purchases from the Fed the norm, the U.S. dollar is bound to come under pressure at some point, meaning we are sure to see higher energy prices across the board.

    Natural gas looks to be forming a significant bottom here and one which is likely to precede a long term bull market built out of increased demand from the world's biggest economies. I also believe that small-cap energy stocks will provide the biggest opportunities in what has been labeled as the midstream section of the energy industry.

    Matrix Service Co. (NASDAQ: MTRX)

    Matrix Service Co., market cap: $398.63 million, offers a great investment opportunity. The company, as of mid-last year, had its roots squarely in the middle of the storage business both geographically and operationally. Just like in 2012, Matrix Service is expected to have a significant rise in earnings. If you recall the December 2011 quarter, it had $37 million in net cash, inclusive of debts of less than $1 million. Ever since, the company has been operating in positive territory and with the expected natural gas boom, its stock will likely be on an upward trend. The company is also spreading its business across different sectors such as project management, minerals and mining. This diversification will help MTRX perform well even during times when the gas market plateaus.

    Mitcham Industries, Inc. (NASDAQ: MIND)

    A second investment opportunity is in Mitcham Industries, market cap: $197.70 million. The company was experiencing difficulties in 2010 but managed to rebound in 2011 and its earnings have been on the rise ever since, even as natural gas prices have stalled. This is a good sign for Mitcham and highlights the value to be had by investing in companies with indirect exposure to energy markets such as gas. By providing the equipment, (outright purchase and lease), Mitcham is able to service the big companies involved in shale extraction yet stay safe in the knowledge that is not affected by energy price fluctuations in the same way as a major extractor. The company is currently trading with a forward P/E of just 8.98. Once gas prices begin to rise, Mitcham should soar.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: natural gas Stocks: MIND, MTRX
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