Masters Series: Porter Stansberry: Are You Playing the Right Energy Trend? Part II
Editor's note: If you're not cashing in on America's "free energy" resource, you're missing out.
In yesterday's edition of our weekend Masters Series, we featured Part I of an interview S&A founder Porter Stansberry gave in January to The Energy Report, from financial publisher Streetwise Reports. He shared some easy ways to protect yourself from rising interest rates, falling stock prices, and a less-valuable U.S. dollar this year.
Today, he discusses some of his other favorite investments for 2014. He says these energy stocks have been some of the best-performing positions in his Investment Advisory portfolio during the last two years.
See which stocks he believes will benefit the most from the energy boom – and what he says is the most important thing for the future of our country and our global economy…
Porter Stansberry: Are You Playing the Right Energy Trend? Part II
Interview from The Energy Report
The Energy Report: Last time we interviewed you, you were very bullish on natural gas. In fact, you said, "I'm more bullish on natural gas today than I've ever been in my life." Is that still true?
Porter Stansberry: It absolutely is. I'm extremely bullish on the entire export energy complex in America: natural gas, propane, ethane, and everything that surrounds those industries like ships, pipelines, and refineries.
The entire complex is going to boom for a wonderfully logical reason that everyone can understand: In the U.S., natural gas and its other liquid components are free. This valuable energy source is being flared. It's being burned into the air at lots of drill sites because we don't have enough pipelines to collect it all yet.
That is even though natural gas is going for $17 per thousand cubic feet in Japan and propane is going for $100 per barrel in Germany. These are very valuable energy sources that have lots of demand globally. The only thing we have to do to make huge profits is build pipelines, refineries, and ships.
This is going to be a long, wonderful market for America.
TER: How are you playing that opportunity?
PS: I bought some low-cost equity where reserves are very large.
I like Devon Energy (DVN) and Chesapeake Energy (CHK). I like companies like ONEOK Inc. (OKE) that own the collection and distribution pipelines. I've bought the refiners and the distributors, like Targa Resources (TRGP), that take the propane and package it on the ships. I've also bought boat companies, like Teekay LNG Partners (TGP), a tanker company that can transport liquefied natural gas (LNG).
These have been very lucrative for us. My energy position was by far the highest-producing position in my portfolio during the last two years. We made more than 100% on several of these recommendations, including Chicago Bridge & Iron (CBI), which is building out LNG port facilities around the world.
It's a wonderful trend that still has a long way to go.
[S&A Editor's note: Some of the positions named have appreciated since the recommendation and are not "buys" at current prices.]
TER: Some of your analysts think gold is hitting a bottom, and gold stocks are one of the best values of the market today. Is it time to think about going into gold equities or do we wait for the correction?
PS: I am recommending certain kinds of gold equities in my newsletter at the present time.
I like NovaGold (NG) because it has an absolutely ironclad balance sheet. Whether the price of gold goes up or down this year, there is no way that NovaGold can or will go bankrupt. It has around $200 million in cash on its balance sheet, and it has two gold projects that have very high-grade ore that are very likely to become mines.
I view the shares of NovaGold, which are still below $3, as essentially a call option on the price of gold. This company will be solvent for the next two or three years. And if the price of gold were to go up in that period, the share price would probably go to $10 or $20. It's a safe way to speculate on a higher gold price going forward.
But you have to understand that this is one position in a portfolio of probably 12 or 15 different recommendations. The allocation that I'm willing to commit to gold is still very small.
That's the way I prefer to be an investor in gold. I like to hold gold bullion and find these reasonably priced call options that give me time to wait for a higher price.
TER: Have you found other gold equities that have that special call-option profile?
PS: Yes. Royal Gold (RGLD) and Franco-Nevada (FNV) are great ways for investors to have exposure to gold without having the risk of shaky capital structures. The key is to have plenty of runway to wait for a higher price.
Having said all of this, I want to be very clear: Gold had a 12-year bull market. It is unlikely, in my mind, that bull market will be followed by a short and painless bear market. I do expect higher gold prices in the future. I don't expect higher gold prices in the short term. I would be surprised if gold was more than $2,000/oz by the end of this year.
I'm buying things that give me plenty of upside, but are extremely low-risk and have no chance of bankruptcy. I still think you have to see a lot of bankruptcy in the sector. There are just too many shoddily financed junior mining companies.
TER: Is there anything else you'd like to share with our readers?
PS: My parting thought is that even if it is painful in the short term, it is incredibly important to the future of our country and to the future of our global economy that the Western governments get their monetary and fiscal houses in order.
We cannot continue to run the world with fiat currency that comes spewing out of the printing presses at the rates we have seen over the last two years. The amount of malinvestment that will be caused by the dislocations of these prices – and the bad economic decisions that entrepreneurs are going to make based on faulty assumptions about interest rates and market multiples – will be very disruptive.
The longer it goes on, the worse it will become.
We have to get to a point where governments are able and willing to live within their means. We have to get to a point where people can once again count on currencies and market prices. Today, unfortunately, we're nowhere near that position. Until that gets fixed, people have to be very conservative with their personal finances.
TER: Do you think it will get fixed in your lifetime?
PS: It will have to because we're on a collision course if we don't do something urgently to put our fiscal house in order and to get the government out of the business of manipulating the currency and interest rates.
TER: Porter, thanks a lot for your time.
PS: Sure thing.
Editor's note: Last month, The Energy Report interviewed S&A's in-house natural resources expert Matt Badiali. He talks about one of the "most highly anticipated trips" he has ever taken (deep into what the media dubs a "live fire zone") to study oil and gas production. See what he found out about the industry – and get his "insider tip" on investing in commodities this year – here.