I've said before that big money is made riding big trends. You need to get on board those trends early and resist the temptation to take profits too soon. Secular growth stories often occur when there's either new ground breaking innovation on the verge of gaining critical mass, major government policy promoting a particular sector, a sector which has been depressed and neglected for years becoming in favor due to a change in fundamentals and/or investor attitudes, or some combination of the above.
Examples of these types of growth stories were the telecom boom of the mid 1990's which was sparked by the telecom act in 1996, the gold bull market of the 2000's, taser stocks and satellite radio stocks in the mid 2000's (these turned out to be fads but for 2 years they were growth stories and big money could have been made) and the Apple revolution. These types of secular growth stories attract investors not only because of the initial strong growth in revenues and/or earnings often seen initially but because of the "sex appeal" of the unlimited-like growth potential of a new sector or a beaten down sector rising from the ashes.
I believe there is potential for a secular growth story with natural gas. Not necessarily the commodity itself but the applications for it, specifically, for natural gas powered vehicles. We all know why or allegedly why, the price of natural gas has been depressed so no need to discuss that. The relationship in price between oil and gas has historically been about 6:1. The ratio has been at least 15:1 for 2 years now. They say when it comes to commodities price cures price. When the price for a commodity is low for a prolonged period it will result in supply destruction and potentially new forms of demand and so eventually the price will rise. When the price is high it will attract new supply and at same time result in demand destruction and so eventually the price will fall. Of course the key word here is eventually. Timing is everything but when prices are unsustainably low, time is on your side to be long and when prices are unsustainable high time is against you. It could take 1,2,3 years or more, but when the tide turns it tends to turn violently and the initial reversal into a new long term bull or bear market tends to erase the previous 1-3 year decline (or rise) in a matter of months.
Getting back to nat gas...as you probably know there has been a desire in the US to become less dependent on oil and more so with alternative, cleaner energy. Ideally it would nice to have everything run on solar, wind and geothermal power but that's not an economic reality just yet. Until it is, natural gas has the potential to be the "bridge" fuel that can replace at least some of the applications that require oil given how cheap, abundant and relatively clean it is. The longer the price stays low like this, the more likely it is that will become a reality. We may be soon at the tipping point where this indeed becomes a reality.
A couple of years ago billionaire energy player T. Boone Pickens aired commercials promoting the "Pickens Plan" as multi-step process to enable the US to become less dependent on foreign oil. The plan basically emphasizes the use of wind power and natural gas, specifically natural gas powered vehicles. Pickens has been pushing for a Natural gas policy from Washington that will encourage the use of such viechles and the building of infrastructure needed to service them (namely, nat gas fueling statations) through incentives like tax breaks. So far, nothing of significance has occurred on this front (as far as I know). Just last week however, Cramer mentioned that senator Harry Reid is once again trying to push a Bill that would provide huge subsidies for purchasers of nat gas powered transport trucks as well as subsidies for nat gas infrastructure and R&D. Cramer is skeptical it will be passed. I have no clue if it will. If it does 2 companies that would likely explode in value and become potential secular growth stories would be Westport Innovations (WPRT, WPT.TO), makers of nat gas powered engines and Clean Energy Fuels (CLNE) which own and operate nat gas fueling stations. I believe Pickens owns quite a bit of WPRT.
I'm keeping an eye on these 2 names and plan on doing more DD to determine just how likely it is for the natural gas growth story outlined above in becoming a reality one day. To be honest, I'm not all that informed just yet but if market action of these 2 stocks start suggesting an upside breakout I probably will jump on board with a starter position.
If anyone has any comments/feedback I welcome it.
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