Natural Gas Prices = Opportunity??

Tightwod · #1 06-07-2009, 04:48 PM

Has anyone looked at the price of Natural Gas lately? It is at what I think is good value relative to oil and other commodities. I recently bought some Horizons Beta Pro BULL (HNU) at $6.55. True, storage levels have been increasing and demand has been compressed, but that happens every Spring. I am hoping a good hurricane season (Sorry) will get the speculators to push the prices up so I can cash out up at least 50% by the fall.

What do you think?

trent · #2 06-08-2009, 05:17 PM

I'm also tempted to buy nat gas at these prices, however I avoid using leverage instruments like Horizons ETFs. I'd rather invest in some promising gas junior, even though this is also a risky strategy.

Steven · #3 06-08-2009, 05:31 PM

Hi,

I'm also interest in Natural Gas and I was wondering what exactly is Horizons Beta Pro BULL? Is this a risky investment? Any help would be appreciated.

Steve

Tightwod · #4 06-09-2009, 01:37 PM

It is an ETF that is double leveraged on the NYMEX price of natural gas. So when Natural gas goes up 2% in a day you go up 4% less the management fees. It is a riskier investment as it is a play on the actual commodity and also because it is double leveraged. If natural gas goes down 5% in a day, your down 10% + Fees. But if you believe Natural Gas is at a low price point than your upside is doubled. The volume and volatility over the last month has been huge. 20% swings per day are common.

Steven · #5 06-09-2009, 03:19 PM

Quote:

Originally Posted by Tightwod

It is an ETF that is double leveraged on the NYMEX price of natural gas. So when Natural gas goes up 2% in a day you go up 4% less the management fees. It is a riskier investment as it is a play on the actual commodity and also because it is double leveraged. If natural gas goes down 5% in a day, your down 10% + Fees. But if you believe Natural Gas is at a low price point than your upside is doubled. The volume and volatility over the last month has been huge. 20% swings per day are common.

Thanks Tightwod,

I don't think I have the stomach for this kind of investment. What other options do I have to invest in Natural Gas, considering the fact that I'm trying to avoid leverage and want to invest in something less risky?

Thanks again,

Steven

bullish · #6 06-10-2009, 01:38 PM

Investing in commodities is way too risky for me, they are volatile and I'd rather stick with stocks.

Tightwod · #7 06-10-2009, 08:13 PM

Enbridge, Encana and Talisman are safer plays on Natural Gas. You get a healthy dividend, company with strong cash flow and of course capital appreciation potential. The HNU's are for a speculative investment for a low % of your portfolio. No more than 5%.

PS - HNU's closed today June 10 at 5.94. Let's see where they are at the end of October, December.

Steven · #8 06-10-2009, 08:28 PM

Thanks Tightwod,

I'll look into the companies you mentioned.
I saw a recommendation for Penn West Energy Trust on another forum, and it looks like they offer decent monthly dividend. Are you familiar with this company, and what do you think about it?

Canadian · #9 06-11-2009, 01:44 PM

Penn West is a Canadian energy trust and you should be aware that there will be changes in the way these trusts are taxed in the future, which can affect their market value.

http://www.pennwest.com/investor/taxinfo_can.html

Tightwod · #10 06-11-2009, 01:55 PM

Penn West may pay a large dividend but that is now. Sustainable?? Don't think so. They were big acquirers from 06-08. They have potentially dug a bigger hole then they anticipated. They will need to cut distributions in order to retain the earnings to finance the acquisition costs etc. And like Canadian said, rules for Income Trust's are changing soon and you never know what "Psychological "effect that will have on investor perception. Also, Penn West is mostly a Oil producer, small portion of business is on the Natural gas side. If you want Natural gas exposure look elsewhere. Don't be greedy for dividends, be reasonable.