This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

4 Contrarian Natural Gas Stocks

Stocks in this article: DVNDPTRCRK

By Roberto Pedone

WINDERMERE, Florida ( Stockpickr) -- Being a contrarian investor can help market players rein in big profits on Wall Street. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricing in securities markets.

For example, when the S&P 500 was trading at 1040 recently, the investor sentiment readings were registering extremely bearish. On Aug. 26, when the S&P 500 was at the 1040-1050 level, the AAI measure of individual investor sentiment had bulls at 20.7, the lowest since March 2009.

Following that negative reading, the market did the exact opposite of what the crowd was expecting and soared higher, all the way up toward its current level around 1142. As you can see, contrarian investing can produce powerful returns.

Another market that could be setting up for a great contrarian trade is the natural gas complex. On Monday, Bloomberg.com reported that hedge funds had reduced their bullish bets on natural gas to the lowest level this year. This change is mostly due to mild weather and a lack of any significant hurricanes in the Gulf of Mexico.

>>>Cramer's Nat Gas Burnout Stocks

According to the article, hedge funds and other large speculators cut their bullish bets on natural gas by 16% as of Sept. 14. Natural gas is down 31% this year mainly due to rising production from shale formations and a supply gut that saw no significant impact from this year's extremely hot summer.

Since the hedge funds seem to be souring on the natural gas trade, it might be time to start looking for opportunities in the sector. Things could be setting up for a great contrarian play now that many of the large traders are starting to throw in the towel.

Also, a number of catalysts for natural gas could be on the horizon, including federal support of natural gas, threatened oil supplies in the Middle East due to geopolitical risks, reduced shale gas production and a potential storm that's developing in the Southeastern Caribbean Sea that could hurt production in the Gulf of Mexico.

Here 's a look at a number of natural gas stocks that could be setting up to make for great contrarian trades.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs