Porter has called it the biggest investing opportunity of his lifetime... And this week, the market gave us some important signals that his investment strategy is playing out as we predicted...
Longtime readers know, we've covered the new boom in U.S. energy production extensively. Improved exploration science and extraction technologies (notably directional drilling and hydraulic fracturing) have released an ocean of new oil and natural gas resources.
The effect of the resulting glut of fuel supplies has been pervasive...
Take transportation... Ohio-based truck-stop operator TravelCenters of America just reached a deal with Shell Oil to add liquefied natural gas (LNG) fueling lanes to 100 of its 230 U.S. filling stations. The first of the LNG fueling lanes could open within a year, according to an article in the Cleveland Plain Dealer newspaper.
The difference in price between natural gas and diesel fuel has created a huge incentive for shipping companies to convert their fleets to cleaner-burning natural gas. It's a decades-long trend that editor Frank Curzio has covered for two years for his Small Stock Specialist subscribers. The build-out of the nation's fueling infrastructure – with announcements like the one from Shell and TravelCenters – is a vital factor in that trend...
In this morning's issue of S&A's free daily e-letter Growth Stock Wire, Frank quoted legendary oilman T. Boone Pickens saying the majority of the U.S. fleet of 18-wheel trucks will run on natural gas by 2020. Frank wrote...
I've been writing about this trend for years. Subscribers to my Small Stock Specialist newsletter have made as much as 116% from buying natural gas transportation stocks early.
But if Pickens' forecast comes to fruition – and I expect it will – these stocks still have massive upside potential.
Companies like UPS, Wal-Mart, and Waste Management are already switching their fleets to run on the clean fuel. Recently, apparel giant Nike and consumer staple Procter & Gamble announced they will use natural gas to power their fleets.
But there are millions of 18-wheeler trucks on the road in America. And only a few thousand have made the switch. Even if Pickens' forecast is half-right, that's great news [for companies supplying this trend].
Frank went to update readers on two of the stocks that will be big beneficiaries of the trend: Westport Innovations (WPRT), which makes LNG-burning engines, and Chart Industries (GTLS), which makes fueling tanks. You can read the full essay here.
Of course, Digest readers know Porter has been focused on another facet of the energy boom: America's ascension as an energy exporter...
The high price of gas in Asia and Europe represents ready markets for our huge new supplies. As we wrote in Wednesday's Digest, the decline in profits at Russian gas giant Gazprom show how many countries are already leveraging new suppliers in places like Australia and Qatar.
The U.S. energy industry has one problem cracking those markets. Our energy infrastructure was designed for imports... It will take a massive effort to convert it to exporting.
And that's the opportunity Porter and his team have focused on. As they wrote in the June 2012 issue of Stansberry's Investment Advisory...
Let's spend a couple minutes reviewing two of the most important byproducts of the domestic natural gas boom: investment in domestic infrastructure and the creation of an LNG export system.
Recently, the mainstream media have been gushing about the U.S. tapping into previously inaccessible reserves, thereby eliminating its dependence on foreign energy. However, innovations in mining and drilling won't do much good if we don't have the infrastructure to move the energy around...
Most people don't know this, but North America's natural gas pipelines make up the world's largest collection of energy-related infrastructure. This infrastructure, more than any other single factor, will be our greatest advantage in the global race to develop world-scale LNG export capacity.
To maintain this advantage, we will see U.S. energy companies make significant additional infrastructure investments. According to an estimate by the Interstate Natural Gas Association, North American industries need to invest $6 billion-$10 billion per year to maintain the storage network capable of handling the growth in production.
Porter has recommended a handful of "picks-and-shovels" plays... and all of them are sitting on large gains. Teekay LNG Partners (TGP), a dominating player in the natural gas shipping industry, is up 41% in about 18 months. And Investment Advisory subscribers could have more than doubled their money on Porter's July recommendation of Cheniere Energy, the firm working to build the United States' first LNG export facility.
One of Porter's favorite ways to invest in the natural gas export trend is Chicago Bridge & Iron (CBI), a leading builder of energy infrastructure worldwide.
But readers who bought CBI when he first recommended it in June 2012 have had a bumpy ride. The stock immediately climbed from $36 up to $41... and then, in late July 2012, CBI announced it would purchase the engineering firm Shaw Group. The market hated the idea, and shares plunged to $34. At the time, we reassured readers...
Clearly, Wall Street doesn't like the (Shaw) deal. Or at least, it doesn't understand it.
That's not unusual. Wall Street tends to sell first and ask questions later. We've spent the last few days asking a lot of questions about this deal... and we've reached a conclusion you won't hear about anywhere else.
We recommended CBI because it sits in the middle of the massive, global buildout of LNG infrastructure. Its products are critical components of the "midstream" energy space – the pipelines, the terminals and the storage containers necessary to use natural gas in "downstream" power plants. Shaw Group builds these "downstream" assets. It provides engineering and construction to the global power-generation industry, with a focus in the U.S... We think it's a smart move to combine CBI's midstream construction business with Shaw's downstream power plant construction because of the ongoing shift to natural gas.
Eventually, the market saw things our way. Shares tore from $34 to $62 over an eight-month period. Then, another bombshell...
News came out last month that Australian firm Woodside Petroleum would scrap its $45 billion "Browse" LNG project. CBI was involved in a joint venture with energy infrastructure firms Chiyoda of Japan and Saipem of Italy that had a contract for part of the Browse project.
Many investors feared that meant bad things for CBI's future earnings. The market panicked. Shares fell 18% over a three-week period, dropping to less than $51 a share.
But we weren't worried... Yes, Browse was a huge project. But it only represented a small share of CBI's $25.5 billion backlog of work.
Yesterday, CBI released its first-quarter earnings. The results were fantastic.
CBI's revenues totaled $2.3 billion in the quarter, a $1.1 billion (87%) increase over its first-quarter 2012 numbers. The Shaw acquisition contributed $625 million of the revenue increase… but CBI attributed the rest, nearly half of the increase, to "increased construction activities on our large LNG mechanical erection and gas processing projects in the Asia Pacific region."
CBI's other numbers were also strong. Net income per share was $33.6 million, after more than $50 million of acquisition-related costs were factored in.
And the company reported that even without Browse, its backlog should grow to nearly $30 billion by the end of the year. CBI shares have bounced back up to more than $55 – 4% in one trading session. Investment Advisory readers are up 50% since last June. And Porter and his team expect more gains to come…
New 52-week highs (as of 5/2/13): WisdomTree Japan Smallcap Fund (DFJ), iShares Singapore Index Fund (EWS), Cambria Global Tactical Fund (GTAA), iShares Dow Jones Insurance Index Fund (IAK), AllianzGI Equity & Convertible Income Fund (NIE), PowerShares Buyback Achievers Portfolio Fund (PKW), Constellation Brands (STZ), Automatic Data Processing (ADP), MGM Resorts International (MGM), Brookfield Asset Management (BAM), Chart Industries (GTLS), Chevron (CVX), CVS Caremark (CVS), Microsoft (MSFT), and Altria Group (MO).
A light mailbag today… but one subscriber writes in with news of his efforts to stockpile some precious metals… Send your e-mail to feedback@stansberryresearch.com.
"Is waiting on delivery of 30,000 ounces of silver. Doesn't expect it to be filled for months. This is stuff already bought, paid for and locked in for price. The coin guy asked his wholesale if he was the only guy in that boat. Wholesaler said he had 15 more guys in the same position." – Paid-up subscriber Ray Massie
Regards,
Bryan Beach and Carli Flippen
Roswell, Georgia and Baltimore, Maryland
May 3, 2013
You've just hit the lottery. You have a somewhat sizeable amount of money to throw around. You want to indulge yourself while getting good value in return. What do you buy?
I (Porter) like collecting Rolex watches, jewelry, and fine wine. I like things that hold their value. It's hard for people to understand, but if you buy a Rolex today, you'll likely be able to sell it in 20 years for substantially more than you paid… just thanks to inflation.
I don't think I'll get rich by buying Rolexes, Tiffany bracelets, or Bordeaux wines. That's not why I do it. I do it because it's enjoyable. And I don't think it will cost me anything in the long run. The things I buy will be worth at least what I paid for them – and probably a bit more – over time.
The real reason to diversify your wealth into desirable, expensive, luxury items is because you have good taste… meaning you have the ability to predict what other people are going to like.
When it comes to wine, I like to think I have good taste, too. I once bet my friend Doug Casey that I could identify six bottles of wine blind. We were sharing a very expensive dinner at the restaurant El Rancho in Cafayate, Argentina. We ordered six locally made Malbecs, ranging from $10 a bottle to $300. I wagered I could identify the price of each bottle even though they were wrapped in foil. If I missed one I would pick up the check. If I got all six right, he was buying…