NEW YORK (TheStreet) -- I was talking to Jim Cramer today about value in the energy sector. Surprisingly, I am finding it less and less in oil names right now and more and more in natural gas.
It's not that the story of oil from fracked wells in the Bakken, Permian and Eagle Ford shales is over. Not hardly. But those stocks that represent the best of these shale plays have been on a tear for so long, and have generated so much profit for us, that we are now looking for better values for reinvestment rather than continuing to pour more money into those names.
That value, I am increasingly convinced, is coming from natural gas names. Because while the story of the "oil from shale" revolution is well known, the "gas from shale" revolution has all but been forgotten in a litany of overproduction, harsh environmentalist responses, multiple failures of nat gas incentive plans in Washington and historically weak underlying futures prices.
All of these are slowly but inexorably changing. Stockpiles for ready natural gas ended March at 826 billion cubic feet, the lowest levels they have been in 11 years. Prices for natural gas, while bottoming below $2/mcf in 2012, have been buoyed by a particularly harsh winter, but still are remaining strong at $4.75/mcf despite the coming of Spring. These are still generationally low prices that cannot help but move up further.
Also, there are small but important catalysts ready to drive the next leg up for natural gas prices and their underlying stocks.
The U.S. is about to become a natural gas exporter for the first time in its history as Cheniere (LNG) prepares to go online sometime early in 2015. As that date approaches and another outlet for ready gas is created, those supplies that have not been sequestered will increase in value.
Recent explosive interest again in fuel cell technology, apparent in the hot trading of Ballard (BLDP), Plug Power (PLUG) and Fuel Cell (FCEL), are all natural gas-based generators of electricity and while the number of produced units remains small, it is another source of slowly building excitement for otherwise left for dead natural gas stocks.