Jim Cramer of CNBC on Wednesday gave a brief overview of five liquified natural gas-related companies that he thinks could be good long-term investments.
Building positions “in companies with exposure to powerful long-term themes, like the rise of LNG,” the “Mad Money” host advised investors to do when the market becomes difficult. “I think this will be one of the best stories of the next decade, regardless of what the Fed’s doing right now or [Russian president Vladimir Putin] is doing for that matter.”
Cheniere Energy (LNG)
A pioneer in the LNG sector, Cheniere is “on track to make $8.62 per share this year, [with] that number expected to grow to $16 in 2023,” Cramer said. “Of course, the stock’s had a huge run, up 59% year-to-date, but if you believe Cheniere can hit the estimates, then the stock remains pretty darn cheap, trading at just 10 times next year’s numbers. But some of that’s because this is temporary and the analysts expect the earnings to pull back to around $12 in following years, although it’s still fairly cheap on that number, too.”
Tellurian is “not expected to begin shipping liquefied natural gas until 2026, but they finally started building their first facility in Louisiana earlier this year,” said by Cramer.
“This makes Tellurian inherently speculative, though, and they’ll probably have to do more than one round of fundraising between now and 2026 to keep everything on track,” stated Cramer. He continued, however, that Tellurian’s vision becomes “more realistic” the longer Russia’s invasion of Ukraine goes on and hinders the flow of gas to Europe.
In April, Cramer said he advised his audience to watch for a decline in Tellurian stock. It was trading at roughly $6 per share at the time. At the current share price of $4, Cramer stated that he believes it is a good time to buy. He added that Tellurian’s co-founder and executive chair, Charif Souki, is also a co-founder of Cheniere.
Sempra Energy (SRE)
While Cheniere and Tellurian are more pure-play LNG firms, Sempra Energy is “more of a diversified utility with a liquefied natural gas export kicker,” Cramer said.
“We’ve got Sempra in the bullpen for the Charitable Trust. … We’re just waiting for a pullback to buy this one because they reported a great quarter. This is the right time to own a utility,” stated Cramer.
Excelerate Energy (EE)
The startup Excelerate Energy went public in the middle of April, according to Cramer, who called it “the rare recent IPO I can get behind.” The business “owns a fleet of ships that work as floating LNG import facilities. If you want to start importing this stuff, Excelerate’s the cheapest and fastest way to do it,” Cramer gave an explanation.
“Now, the stock had been on a nice roll, but in recent weeks it’s been clobbered, including a nasty 8% decline just yesterday, possibly because European regulators started talking about imposing price controls on natural gas,” Cramer said. “Still, Excelerate’s started making deals with European countries that desperately need energy. Even before that, they had 223% revenue growth in the second quarter, but now you’re basically getting that quarter for free.”
However, Excelerate is a little more speculative, so Cramer did warn that it would be best for younger investors who can take on more risk.
“While this company’s basically a toll road operator for energy, they’ve also got a number of irons in the fire for liquefied natural gas,” Cramer said. Just over a month ago, Enbridge announced a partnership with Pacific Energy to build an LNG export terminal in British Columbia. Plus, their pipeline network transports a great deal of the gas that goes to other people’s export terminals. The rise of this sub-sector is terrific for their core business. It may take a long time to kick in, but Enbridge is paying you to wait with that 6.3% yield.”
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