If I Had To Pick Just One Investment
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- Published on Thursday, 24 May 2012 08:00
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
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Royal Dutch Shell is far more than an oil dominator. For the first time ever, it pumped more natural gas than crude last year. It is proof the world is changing fast.
If I had to make one investment for the next 20 years... I'd buy shares of Royal Dutch Shell (RDS:NYSE).
To be sure, buying just one stock is a preposterous notion. Few folks ever get rich -- and stay that way -- rolling the dice on a single stock. I'd much rather own some timber, some gold, a farm, and a chunk of a few other strong companies.
But put a gun to my head and tell me to choose... I'd choose Shell.
The Dutch company is at the heart of the world's energy transformation. In fact, when it comes to the great natural gas switch, it is leading the way.
Right now, Shell owns over 12% of all natural gas in North America. And it has taken the drilling lead in Europe. And it's dominating China's recent gas explosion. Same thing in Africa... and Australia.
But it's not just drilling for natural gas. It's using the stuff, too.
This is where my view strays from conventional logic. It's where we let mainstream investors continue on the four-lane highway to nowhere, while we hop off the exit and take the dirt road that leads to somewhere few folks ever get to venture.
It's like I told conference attendees in Toronto earlier this month -- Shell profits from natural gas at every stage of the game. That means its business is removed from the danger of volatile spot prices -- that's how it can afford a rock-solid annual payout of close to 5%.
While conventional sector players like Chesapeake (CHK:NYSE) and even Range Resources (RRC:NYSE) get hit by falling prices, Shell reaps outsized rewards from the other end of the spectrum.
When prices are as cheap as they are today, Shell's vertical business model shines.
The company made waves in Pennsylvania recently when it announced a brand-new multibillion-dollar "cracker" plant. The company will use its vast supply of cheap natural gas in the region to feed ethylene to the nation's plastics industry.
Five years ago this kind of news was unheard of. It was too expensive to produce these chemicals domestically. Asia was the king.
It's the same story for Shell's latest big game-changing push.
Over the past two months, the company has been spotted looking for sites to build a gas-to-liquids plant in Texas and Louisiana. Its goal is to take advantage of the nation's excess gas and turn it into diesel or jet fuel.
It's not far-flung technology. It's been around for over 80 years.
In fact -- here's the juiciest part --Shell is using gas-to-liquids technology in Qatar right now. The hugely successful plant sends an extra $6 billion to the company's bottom line each year.
If Shell builds a similar plant here in the States... it's a game changer.
Finally, the best for last.
Shell has teamed up with a tiny company that will become a household name in the next five years (see the editor's note below). It is already a favorite amongst Unconventional Wealth readers.
The energy giant just pledged $250 million to help kick-start the infrastructure that is necessary to get the nation's cars and trucks running on natural gas. Even better, Shell has teamed up with the company I am positive will be an industry leader (if it doesn't get bought by a conglomerate first... hint, hint) in what they call a co-marketing program.
It allows Shell to open the door to a huge new market (truck drivers spent over $135 billion on fuel last year) and gives the much smaller company a partner to lean on.
Both will be big winners.
Here is the takeaway that solidifies the idea that Shell's dominance will grow multifold from here. For the first time ever... natural gas accounted for more than 50% of the company's production last year.
The days of Big Oil are over. From here on out... it's Big Gas.
It's like I said yesterday: Natural gas is the fuel of the future. And Shell is the dominator.
Editor's Note: If you're only going to buy one stock, Shell is it. But you won't get rich with Shell. To do that, you've got to get a stake in the next big thing.
Yesterday afternoon, I met with officials of the tiny company I mentioned above. They showed me the ins and outs of their latest natural-gas breakthrough. It was amazing. I am more convinced now than ever before the future of America's cars and trucks... is natural gas.
Chart of the Day: The USA's Strange Resource Problem
By Adam English, Associate Editor, Inside Investing Daily
Of all the commodity problems you could imagine, this one is pretty bizarre.
The USA will face a helium shortage in the next couple of years. Meanwhile, the U.S. government is practically giving the gas away to the private market.
The U.S. government started stockpiling helium in the Federal Helium Reserve way back in 1925. Blimps and airships didn't exactly find a market, but helium was still critical for research, cooling systems and the space race.
The program slowly accumulated more and more helium until 1996. That is when the U.S. government decided the $1.4 billion deficit was a bit absurd and started selling the gas to buyers.
Everything was fine for a few years. Customers bought large chunks of what they needed from the reserve and Uncle Sam whittled away at its helium debt.
Then private market prices started to soar. At this point, the U.S. government is selling the gas for a fraction of what it is worth.
It isn't desperate to get rid of the helium. The law in 1996 doesn't have any way to accommodate rising prices.
To make matters worse, the law granting access to the government gas is set to expire in 2014. If it lapses, an estimated 30% of worldwide supply will be off-limits overnight.
It is proof of how strange things can get in a free market when a government dominates a resource.
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