Has natural gas hit bottom? One thing that has endlessly plagued this market is the belief that there is no bottom to oil or natural gas.
I think that we are seeing some stickiness in oil in the $50s. I am looking for that to be challenged and held today and tomorrow when inventories are broadcast. But more important, I think there is a place where natural gas is having trouble going down now because it is too cold. We are in the season where natural gas should have fallen more before it got here, because without some sort of unseasonably warm snap, we will now believe that nat gas is permanently above $5 and change, where a whole host of prudent companies, like Equitable (NYSE: EQT) (Cramer's Take) for yield and Ultra (NYSE: UPL) (Cramer's Take) for growth, make a lot of money.
We have more than a couple of ways to play this. Equitable has a decent dividend, one of the rare natural gas E&P companies with one of those. Equitable's finding costs are less than half the current pricing. The conservatives can play it with the Chesapeake (NYSE: CHK) (Cramer's Take) preferred; nice upside while you wait. Another way is Anadarko Pete (NYSE: APC) (Cramer's Take), run by industry stalwart Jim Hackett, who came on "Mad Money" recently and said that his company's oil and gas mixture is equal to about $10 a barrel but the stock is only at $37, and I suspect that it could go back to its $35 price if the oil futures stay this gloomy.
But I think the best way to play the whole energy complex is with BP (NYSE: BP) (Cramer's Take), because that has the best yield, and if oil stabilizes you have some real upside. Remember that there were two issues with BP: the price of oil and the Russians. I think that oil is hard-pressed to fall to the low $40s where I think that BP trades at, and I don't believe the Russians are in any mood at this point to upend the capitalist apple cart.
One other option -- I hesitate to even call it a natural gas play -- Kinder Morgan Energy Partners (NYSE: KMP) (Cramer's Take). This one just upped its distribution last night and is the steadiest of the Steady Eddies. Of course it has no upside to the price of natural gas, but there would have to be a gigantic shift out of natural gas -- almost impossible to envision -- and permanently nice weather -- 72 degrees every day -- in order to dent this one.
Random musings: I see Doug getting more and more bearish. I don't like to buy up 800 and did some selling into strength yesterday for Action Alerts PLUS. I do feel more constructive, though, as I said yesterday, knowing that there is an economic team in place for the switch, run by someone Wall Street loves, Tim Geithner, who the press says over and over again wanted to do the right thing but couldn't because of his bosses, and Larry Summers, whom I love -- he understands that bold action is the only way to go because things are that bad.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long BP.
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Reader Comments (Page 1 of 1)
11-25-2008 @ 9:46AM
Harold said...
Long term I'd prefer to buy Gazprom...
11-25-2008 @ 11:59AM
Mark said...
Why on earth does anyone still listen to Jim (Bear is fine!) Kramer? Take his advice and you'll get the kind of returns you deserve.
11-25-2008 @ 12:41PM
EMIL J KOVACH JR said...
NAT gas Has Not Bottomed, A Warmer Then Normal, Fall, And A Milder, then expected Winter--Are predicted,
There's Less then 100 Days Of A Heating Season, Left.
EMIL J KOVACH JR
11-25-2008 @ 1:15PM
beachpaul said...
That's a turgid thought Jimbo, but there is already enough flatulence in everyones portfolio.
11-25-2008 @ 2:16PM
larry said...
been around oil and gas all my life. father, me, all uncles but one in every phase. exploration, refining, wildcatting, foreign exporation. every one said barnett shale -biggest -sove everyone's problems. then, ndak, montana, w.va. uppern.n y. we will always appear to have good supply. overproduction cause gas to drop. good and bad thing. convert more homes, trucks, buses, commercialvehichles like city, state etc. to cng. wind power. listen to boone pickens . he's lost more money than this guru. and knows of what i speak. i will say that in 1986 i had to pay 9 cts pr 1000 cu ft. for marketing costs. but, gas can save this country from dependence along with clean coal, wind , solar, and nuke. happy trails.
12-05-2008 @ 8:25AM
Stock Trader Larry said...
Amazing isn't it. CHK shareholders are obviously upset. The stock is down another 37+% in the last 7 days since this post. Between the shelf filing dilution and the OPEC decision to not make cuts at this time, "How Low Can We Go?"
Do I here $25.00 oil anyone?
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