The short term investing stock picks blog

Today, I wanted to write to you about an extremely attractive technical and fundamental play, again in the natural gas arena.  Appropriately, if not so creatively, named Natural Gas Services (NYSE: NGS) provides small to medium horsepower compression equipment to natural gas companies. NGS main value added comes from non-conventional natural gas production business, such as coalbed methane, gas shales and tight gas.  This is a business model that is becoming extremely more attractive as natural gas has finally risen out of its doldrums and looks fundamentally sound above $9 mmbtu through 2008 and, some say, as high as $13 in 2009.  This means that unconventional gas formations will be seen as increasingly attractive and profitable means of growth for E&P companies.  This is especially so in the ‘buzz’ exploration areas of the Marcellus and Utica shale.

Technically, we are seeing the end of a little mini cup/flag pattern forming on NGS as shares took a break somewhat last week.  As this one proves itself back over its previous high of $29.00, it is likely that it will continue its run up.  I don’t use a lot of these, but many of your traditional technical bullish signs are glowing bright green for NGS right now.  A good free resource, to use as a guide only, is the Trading Day page.  The average volume on NGS is around 233k.  In the past three months 7 of the last 9 times the stock traded over 300k it was up.  If it hits $30 it will be a double top breakout on the P&F chart.

Fundamentally, the stock must have growth to drive gains higher.  The stock already trades at a P/E around 50% higher than its peers in the Oil Services group, mostly because many see 18-30% growth in this company for some time to come.  The stock is actually trading, despite its run, near the bottom of its short P/E history for forward and trailing quarters.  The company will announce results at the end of May and I believe the estimates remain very low for the company, providing a great potential for upside.  In the second quarter, the company moved to a new fabrication facility which will allow it to add over 300 new rental units to its service fleet in 2008 alone.  This should provide at least a 20% increase in its rental fleet, as the company had around 1,353 rental units at the end of fiscal year 2007.  The company’s growth could be hindered by the inability to raise sufficient capital and new technical from its larger oil and gas service competitors.

Disclosure: I hold no position in NGS.

I have been very bullish on Natural Gas since the beginning of 2008.  The commodity has rallied through the $10 mark.  This morning, Goldman Sachs (NYSE: GS) noted that it now sees summer nat gas to come in over $11 and may be as high as $13 in 2009.  The reason?  International demand is on the rise (sound familiar).  LNG imports are increasing dramatically ex-US, especially in Europe.  GS noted that prices will have to increase in the US to match prices abroad in order to get shipments of the commodity into Henry Hub.  This has lead amny E&P players to begin signing leases like crazy in the less conventional formations, most notably the Marcellus and Utica shale in the Northeast and Canada.
You can play the commodity as a an ETF with AMEX: UNG.  My favorite three E&P plays include Range Resources Company (NYSE: RCC), Cabot Oil & Gas (NYSE: COG), and Chesapeake Energy (NYSE: CHK).

Disclosure: I own shares of CHK in my buy and hold portfolio.

I wanted to announce to the blog audience the creation of Instant ETF.  Instant ETF was an idea I had while trying to find some ETFs for my portfolio a while back.  What I found was that while there are many tools out there, few offered a simple approach to browsing ETFs.  At times, I could get lucky with using Google Finance’s autocomplete, but since most ETFs official name starts with its manager (like iShares), it was hard.  I’ve found ETF Connect’s search function somewhat useful as well, but also limiting if I didn’t know exactly what I was looking for, or say if I was an average investor what the heck a closed-end fund was.

Instant ETF offers the ability to simply browse by name, expense ratio, sector, bond type, location, market cap, and investment style (bullish/bearish).  Its a simple system — you can’t currently filter by multiple attributes or search traditionally — these may be added in the future.  The system currently contains around 1,000 ETF/ETNs, which I do not believe is a fully exhaustive list, but pretty darn close.  I know there are probably a few of those closed-end funds that I do not have in there.

In any event, check it out and enjoy!