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4 Plays on Falling Natural Gas Prices

Natural gas prices have fallen almost 20 percent so far this year. But despite lower prices, some of the natural gas utility stocks are up. So what’s the reason for the disconnect—and what’s the best play for investors? Philip Gotthelf, president and commodities analyst at Equidex, and James Lykins, natural gas utilities analyst at Hillard Lyons, shared their insights.

“With prices down, there’s a couple of ways that the natural gas utilities can benefit,” Lykins told CNBC.

“Where it really helps is the storage and utilities side.”

The utilities really don’t care if the gas prices go up or down, as long as there’s volatility, said Lykins. (GetNatGas Futures/Prices Now)

In the meantime, Gotthelf said the natural gas play between the commodity itself and the stocks are "all anticipatory."

“Natural gas is emerging from the green movement as the fuel of choice—we’re already seeing signs that infrastructure may be changed over for the transportation industry to take into consideration some amount of natural gas,” explained Gotthelf.

“This makes stock plays anticipatory, so you can push up stocks that can benefit from this kind of movement higher, even if the price of natural gas is going down.”

Gotthelf said that while natural gas prices have always closely correlated to crude oil, gas has greater supply both locally and globally.

“When price of natural gas goes down and fixed contracts have a higher price, the spreads are more profitable,” he continued. “Therefore the bottom lines of these utilities and gas distributing companies, pipelines, go higher.”

Lykins Recommends:

South Jersey Industries

Piedmont Natural Gas

Northwest Natural Gas

New Jersey Resources

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Disclosures:

No immediate information was available for Gotthelf or Lykins.

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