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How to Buy the Cheapest Commodity in the World

By Matt Badiali, editor, S&A Resource Report
Wednesday, September 29, 2010

After a 30% haircut in just over two months, natural gas is once again the cheapest commodity you can invest in right now.
 
Natural gas is the "clean cousin" of crude oil. It's a major source of fuel to heat and cool homes. We also use it to produce plastics, chemicals, fertilizers, and electricity. I like the commodity long-term as a government-approved, tree-hugger- endorsed alternative to coal-fired power plants.
 
As I've detailed many times in Growth Stock Wire, the U.S. is in the midst of a natural gas supply glut. Over the past decade, new drilling and production techniques have opened up the shale frontier and brought enormous new supplies online. This has crushed the price of gas over the past few years... and has led me to label the $3.50 area for gas "the new cheap." This is where end-users consider gas a terrific bargain.
 
Back in the spring, I recommended buying natural gas royalty trusts as a way to earn income on cheap natural gas. As you can see from the chart below, the commodity was beaten down into the $4 area. Natural gas soon "popped" into the $5 range and took many natural gas stocks with it.
 
That "pop," however, has turned into a big decline... and natural gas is now back to super-cheap levels around $3.75. This is once again a chance to buy natural gas stocks.
 
 
Exploration companies aren't going to pay you much in the way of dividends, but they offer high upside if natural gas prices pop... and they offer the upside of a big discovery.
 
Companies like Southwestern Energy (SWN), Range Resources (RRC), and EnCana (ECA) generally track the price of natural gas. These companies are beaten down... and have the potential to rise a quick 25% if natural gas simply gets "less bad."
 
Good investing,
 
Matt Badiali




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Market Watch
Symbol Price
Change
52-Wk
S&P 500 1144.73 -0.3% +7.9%
Oil 33.94 +2.3% -1.1%
Gold 127.95 +0.1% +31.3%
Silver 21.40 +0.5% +34.7%
US-Dollar 78.77 -0.2% +2.3%
Euro 1.36 +0.3% -6.6%
Volatility 23.25 +2.9% -7.7%
Gold Stocks 513.95 +0.1% +25.2%
10-Year Yield 2.51 +2.0% -23.7%

World ETFs
Symbol Price
Change
52-Wk
USA 114.47 -0.2% +8.0%
Canada 27.89 +0.3% +10.9%
Russia 19.53 +0.2% +3.3%
India 36.30 -0.4% +25.8%
Israel 16.18 +0.4% +18.3%
Japan 10.01 +0.5% +1.2%
Singapore 13.23 +0.2% +23.8%
Taiwan 13.49 +0.7% +11.9%
S. Korea 53.15 +0.5% +12.8%
S. Africa 66.82 -0.1% +21.7%
China 42.72 +0.5% +3.3%
Lat.America 49.91 +0.4% +17.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 114.13 +2.2% -3.2%
Big Pharma 65.30 -0.3% -0.5%
Internet 64.41 -0.3% +27.2%
Semis 13.22 +0.5% +4.6%
Utilities 31.48 -0.2% +6.7%
Defense 17.23 +0.1% +5.5%
Nanotech 9.15 +0.2% -13.9%
Alt. Energy 9.85 +2.2% -10.1%
Water 16.57 +0.1% -1.3%
Insurance 15.38 +0.6% +10.5%
Biotech 19.41 -0.3% +12.9%
Retail 17.62 -0.1% +14.7%
Software 22.49 -0.4% +16.6%
Big Tech 49.29 -0.2% +16.8%
Construction 11.90 -0.3% -2.5%
Media 12.29 -0.4% +14.4%
Consumer Svcs 61.25 -0.4% +16.8%
Financials 52.07 -0.6% -1.8%
Health Care 63.33 -0.3% +7.0%
Industrials 57.91 +0.0% +14.2%
Basic Mat 64.83 -0.5% +17.5%
Real Estate 52.76 -0.7% +22.8%
Transportation 82.09 +0.4% +18.8%
Telecom 21.81 -0.3% +15.2%

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