Natural Gas: a ‘Hot’ Investment

11/24/2008 11:56 am EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue Chip Growth, is placing his bet on a top natural gas producer.

There are certainly challenges ahead in the near term. But our best defense remains a strong offense of fundamentally superior stocks that posted tremendous performance this earnings season will emerge as market leaders over the next six months. Unemployment and consumer spending problems continue to create challenges for the economy. However, the seasonally strong time of year has arrived and there is a lot of hope for the future. The thawing of the credit freeze, easier year-over-year earnings comparisons, the influence of a new president, and the general seasonal surge for the market have set us up to kick off 2009 with a bang.

This month I have one new buy in Southwestern Energy (NYSE: SWN), which is also a Top Five stock. If you’re asking why I would recommend an energy stock with crude oil prices taking a nosedive, consider the fact that Southwestern is almost strictly a natural gas company—and that natural gas is the cleanest-burning fossil fuel. With the world’s increasing attention to “green” power, the future is extremely bright for this booming stock. And with cold weather descending across America, SWN will certainly see “brisk” business this winter.

But don’t think I’m just selling you on an idea. Look at the numbers: In the third quarter, Southwestern’s earnings rose 320% to $218.2 million or 63 cents per share compared with $51 million or 15 cents per share in the same quarter a year ago. During the same period, the company’s sales soared 129.5% to $683 million. Wall Street was expecting earnings of 41 cents per share on sales of $568 million, so Southwestern Energy posted a 53.7% earnings surprise and a 20.2% sales surprise. What’s more, the company said its production rose 76% to 52.8 billion cubic feet during the past four quarters—meaning this company is growing at light-speed!

Southwestern has tremendous future potential, too, with a great customer base in the American Southwest and a huge supply of natural gas. In 2007, the company reported estimated proved reserves of more than 1.4 trillion cubic feet of natural gas equivalent. Southwestern Energy is also engaged in natural gas gathering, transportation and marketing. As the world looks to transition to cleaner forms of energy, Southwestern will be leading the charge.

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