Wednesday, November 24, 2010
Over the past 10 years, energy investors have made ridiculous gains following one simple strategy: own America's most relentless "gas growers."
Gas grower Chesapeake Energy climbed more than 20-fold from 2000 to 2008. Gas grower Range Resources climbed more than 45-fold during the same time. This kind of gain can turn a modest investment of $10,000 into enough money to pay cash for a new house.
These "gas growers" are natural gas exploration firms that mastered horizontal drilling and fracking of natural gas fields. These new technologies have turned the U.S. into a country that planned to import gas, to home of the world's largest supply in less than a decade. And they've turned Chesapeake and Range into large companies... so large that their hypergrowth stages are over...
But while the incredible gains are gone for these big gas companies, you can still use their template to set yourself up for another potential 20-fold gain. The secret is to focus on relentless reserve growth.
Here's a table of other successful growth stories:
Here's the thing: Three of the five companies in the table above have over a trillion cubic feet of natural gas and oil reserves. At that level, to grow reserves by 10%, the company must add 100 billion cubic feet of natural gas in addition to replacing its production. That's incredibly hard to do.
So investors looking for the next Chesapeake should focus on companies with high growth history but small market values, like these...
These are just a few examples. Plenty of others are out there to find if you're willing to do a little research.
Look for companies with solid management operating in good locations like the Marcellus shale in Pennsylvania, the Piceance Basin in Colorado, and the Eagle Ford shale in Texas. Make sure they have a couple years of double-digit reserve growth behind them.
Thanks to low gas prices, we can buy these companies cheap. The growth will deliver us healthy, triple-digit gains. And when natural gas prices begin to rise, they'll likely soar in value.
If you have the patience, you will see 300%-plus gains in this sector over the next five years.
As Growth Stock Wire readers know, you can make a fortune in commodities by investing when things go from "bad to less bad." In September, Matt showed you three companies that were "beaten down" with the potential to pop if natural gas just got a little "less bad."
If you had followed his advice, you would already be up double digits on two of his three recommendations in less than two months. There's likely more to come. Get the full story here: How to Buy the Cheapest Commodity in the World.
Euro plummets to eight-week low... debt "contagion" is spreading from Ireland to Portugal.
Gold prices rise 3% over the past week despite U.S. dollar strength.
Indian auto giant Tata Motors hits all-time high… up 105% this year.
Earnings today... Deere (farm machinery), Tiffany (diamonds).