Your Next Move In Penny Stocks…

| April 24, 2012 | 0 Comments

Natural GasIf you’ve missed what’s going on in natural gas, you either don’t follow the markets or you don’t use natural gas for energy in your home.  Regardless, natural gas has fallen to a 10-year low… even trading under $2!

And the reasons are simple… supply and demand.

The winter of 2011 has brought about a “perfect storm” for natural gas investors.  And this perfect storm has forced natural gas into clear short-term oversold territory.

First off, the process of “fracking” has allowed natural gas producers to tap into multiples of the previously assumed cap in natural gas reserves.  And in the process, the added supply coming online has helped drive storage levels well above 5-year averages.

Second, demand for natural gas has fallen off a cliff!  This past winter, traditionally cold and snowy regions of the US were treated to one of the mildest winters on record.  And the elevated average temperatures allowed homeowners to use less natural gas to heat their homes.

While great for consumers and the overall US economy, it’s been a real double whammy for natural gas producers and investors alike.

As you can imagine, the dramatic drop in natural gas prices has caused the bottom line of both big name and independent producers to suffer.  Stocks have sold off dramatically, and investors have lost fortunes.

But it looks like prospects might be turning up soon enough…

You see, once supply levels reach maximal capacity, the supply overage is less likely to affect the spot price of natural gas.  Basically, if storage is full, then the massive supply is irrelevant.  If it can’t be stored, it can’t be sold (or used).

Better still, another by-product of low natural gas prices is sure to help it climb out of the cellar…

The massive drop in price has forced many natural gas producers to simply shut down production.  At these terribly low prices, natural gas can’t be produced for a profit.  The hard, fixed costs out-weigh what the market will pay at the moment.

But that can’t last forever.  If producers slowly shut off the rigs, as they have over the past three months, supply will diminish as well.  And once supply diminishes, and demand returns to normal… prices are set to surge higher.

So how can penny stock investors profit in natural gas?

Well, since natural gas prices have fallen so hard, many stocks that once traded in the teens or higher, now trade well below $10.  That’s where our opportunity lies.

In fact, I’ve previously told you about a natural gas company that’s trading so low it’s below book value… Gastar Exploration (GST).  That simply means, if the company was sold off in parts, GST would be worth more than the stock trades for right now, which is under $2.50 a share.

With natural gas prices now climbing above $2, it’s a great time to take a look at these penny stocks for your portfolio.

Editor’s Note:  To discover how to make great penny stock picks, check out our free report here.

 

Until next time,

Brian Walker

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Category: Energy Stocks

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.

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