Opinions
Larry Berman CFA, CMT, CTA
HBP NYMEX Nat'l Gas Bull+
HNU-T
DON'T BUY
Apr 27, 2015
$3.170
Stock price when the opinion was issued
E.T.F.'s
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DON'T BUY
Over long periods of gas, there will be a natural decay in net asset value. Short term trading could pay off. Buy high and sell low. Natural gases are doing well right now, but he would prefer to play it through ETFs and equity exposure. Natural gas is a relative winner in the next few years. There has been significant under investments.
E.T.F.'s
PARTIAL BUY
Leverage play for natural gas. Clearly getting a breakout in the short term. Thinks oil is capped out and natural gas should trade relative to oil. Can see front month natural gas contracts going for $5. Forward pricing looks like there is room into next year to move further up. An okay way to do it if you can handle leverage. Not for a long term buy and hold.
E.T.F.'s
DON'T BUY
Double exposure to the natural gas market. Canadian and US stocks, in general, have a volatility of about 15%. The volatility of nat gas is in the range of 80%. So this one is a wild monster to deal with.
He's actually a bit bearish on energy because of the stated intention of the US government to pump oil and nat gas to lubricate the economy and economic growth. More production will hamper price increases. Secular pricing will be lower, spikes will only be cyclical.
The other side is that we have lots of AI power demand. Longer term, we could maybe see so much demand that prices get up off the floor.
E.T.F.'s
There is always risk in these. Every day, to get the 2 to 1 leverage, when the market goes up they have to buy more of the derivative the next day to get the same benefit. When the underlying commodity is volatile, you get more erosion of the ETF value. Nat gas is amongst the highest in volatility. It is better to play it with the equity ETFs. ZJN-T, for example.