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Here's Why Natural Gas Is a Buy


NEW YORK ( TheStreet) -- I love natural gas and energy in general. I follow natural gas and oil using U.S. Natural Gas Fund (UNG) and United States Oil Fund (USO) exchange-traded funds because of their ease in trading.

Add in the S&P 500 ETF (SPY) and PowerShares 100 (QQQ) and you can ascertain the entire economy as quickly as any other method.

For example, if you want to budget for heating your home this winter compared to last year, reviewing the weekly natural gas chart will paint a picture accurate as anywhere else. You may not know it but natural gas can do much more than heat our homes, it has the potential to end our dependence on foreign energy imports.

The road to energy independence comes from natural gas displacing diesel and gasoline motor fuels. Companies focused on the transition from our oil dependency include Westport (WPRT), Clean Energy (CLNE), and Cummins (CMI).

Energy independence isn't the only benefit from utilizing natural gas, at current prices; natural gas is a lot cheaper per mile to operate than gasoline or diesel.

Currently, there are two barriers slowing widespread implementation.

The first is the upfront cost. It costs more to enable a vehicle to operate on natural gas, especially a dual-fuel vehicle. Because natural gas is cheaper, the upfront costs can more than be made up from lower operating costs. By some estimates, commercial trucks using Westport's or Cummins' natural gas engines can realize a breakeven point in about 12 to 14 months.

Second, refueling stations aren't as prolific as diesel stations, much less gasoline. That's quickly changing, in part, thanks to Clean Energy. Clean Energy Company operates over 300 natural gas fueling stations in the United States and more in Canada.

It takes time to build critical mass, but the concept is catching on based on Ford (F) and General Motors (GM). F-150 and Chevy Silverados capable of burning natural gas instead of gasoline are now available. Dodge Ram rounds out the pickup trucks and Honda (HMC) makes a passenger vehicle.

Even BNSF Railway, the largest railroad in the U.S. and a subsidiary of Berkshire Hathaway (BRK-B), started testing natural gas in locomotive engines developed by General Electric (GE) and Caterpillar (CAT).

How can you profit from expanding natural gas use? The most obvious choice is to buy UNG shares if you don't want to trade commodities. But I'm going to share with you an alternative investment.

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