There’s something special going on in the United States…
I’m sure you’ve heard the story by now… Thanks to incredible breakthroughs in drilling technologies, the U.S. is in a full-scale energy revolution.
And thanks to a simple anomaly in the energy market, we have a crazy opportunity to profit. The last time it occurred, investors walked away with 240% gains.
Let me explain…
[ad#Google Adsense 336×280-IA]In 2011, the U.S. produced the most natural gas in history.
The previous peak was in 1971… 40 years earlier.
Over the past four years, gas production is up 20%.
With all the new supply coming online, the price of gas crashed…
From June 2011 to April 2012, it fell 63%.
Then, when no one thought natural gas prices could go anywhere but down, the opposite happened… Prices began to rise. Since last April, natural gas prices have been in a strong uptrend… rising 114% in just 14 months.
We haven’t seen this kind of sustained uptrend in gas prices in over 10 years. But something interesting has happened since prices turned around… While gas prices have more than doubled, the share prices of gas companies have gone nowhere…
Just 12 months ago, these companies were pulling gas out of the ground and selling it for $2 per thousand cubic feet (mcf). Today, the going price is nearly $4 per mcf. In just over a year, gas prices have doubled. Yet, the prices of companies that pull gas out of the ground and sell it are up just 5%.
I’m no expert in energy. But I understand economics. What’s happening in the chart above should not happen.
Higher gas prices should mean higher earnings. And that should translate to higher share prices for natural gas companies. It hasn’t happened… yet.
I believe it will. And history provides us a near-perfect example…
You see, what has happened recently with natural gas prices looks a lot like what happened in 2001-2002…
In 2001, prices crashed… falling below $2. Over the next four years, prices more than doubled to over $4… just like today.
Again, you would have expected natural gas companies to increase in value while the natural gas price increased. But they didn’t. Share prices actually fell!
This shouldn’t have happened. It was a crazy anomaly.
The share prices of natural gas companies had to go up. And soon, they did…
Over the following two years, the anomaly corrected itself. Natural gas companies made more money thanks to higher natural gas prices. And their share prices soared 240% in just two years. The stars were back in alignment.
Today’s setup is similar to late 2002…
Natural gas prices have doubled, but natural gas companies have gone nowhere. The anomaly is in place again.
The last time this happened, natural gas companies increased 240% in two years. I can’t guarantee a return like that today. But based on history, we want to own these businesses right now.
Good investing,
Steve
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Source: DailyWealth