Short-Term Key: Negative Long-Term Key: -74 (Neutral-to-Negative)

 

Will the last be first or at least not last? We are talking about natural gas, which among major industrial commodities was the worst performer of 2009. While we would not take bets that gas will lead the commodity pack in 2010, we would not be surprised to see it perform much better – perhaps outperforming oil, which we also expect to be strong in 2010. But strong gas prices will not necessarily translate into gains across the board for gas stocks. You will have to selective. Two of our current recommendations which stand out are energy giant ConocoPhillips (COP) and contract driller Nabors Industries (NBR).

 

Ironically, one of the strongest pieces of evidence that augurs strong natural gas prices is the recent takeover of independent gas giant XTO Energy, by the world’s largest energy company, Exxon Mobil. At first glance it would seem that the XTO shareholders got an excellent deal. Exxon paid (inclusive of debt) a 25 percent premium, which works out to about $52 a share. But XTO’s stock is still trading well below $52. One reason is that the acquisition is an all-stock deal.