London Calling! I continue to travel the world in search of stock ideas and business for my firm, Excelsior Capital Partners, and that has taken me to my old stomping grounds in jolly old London. If you listened to all the rhetoric that is being used to heat the atmosphere via windy politicians, you might think it a permanent 90 degrees and baking here in the Big Smoke. It's 55 degrees today, and feels much colder owing to a persistent, cold breeze. So, global warming is going to feature a couple hundred miles north of here at COP26 in Glasgow beginning on Halloween, but here on the ground it's colder than a discarded pumpkin.
That's what Joe Strummer was singing about, when he sang "the Ice Age is coming'' in the title track from that seminal album. Apparently he had just read a newspaper article describing the possibility of a "New Ice Age," which was a very popular theory throughout the 1970s and into 1979, when that album was recorded. So, in the course of a little more than 40 years, we have gone from being convinced that the earth is freezing to being convinced that it is melting.
Hmm.
I will just leave that there. I talk about stocks, not politics, and the last thing I want to do is argue with some "woke" Birkenstock-wearing zealot and waste precious column space. Joe also sang about a "nuclear error" in "London Calling'', which was released in December 1979, a clear reference to the March 1979 Three Mile Island nuclear incident. I was happily in elementary school in Central Pennsylvania then, about 30 miles from TMI, and I was glad that all the scare stories about "meltdowns" and the China Syndrome never occurred. To this day I do not glow in the dark.
But that's what you have to watch out for as in investor. The narrative is constantly shifting. The mainstream media -dominated in the U.S. by the Left - will use endless column space to talk about the narrative du jour. Ignore them, especially when it comes to your portfolio.
With the prospect of a cold winter in the forefront of people's minds here, and the gymnastics in the European gas market only partially resolved, the fact is that natgas prices are much higher than they have been historically.. According to Yahoo Finance, today's close on the Dutch TTF benchmark for European natural gas pricing was €88.25. On October 22, 2020, it was €15.26.
That's inflation! While Boris Johnson may be concerned that the dirtiness in Glasgow (Glasgow's sanitation workers are currently on strike) will distract technocrats from the cold weather, the fact that the price of his country's main residential heating fuel has risen nearly 500% year-on-year, has to be somewhere on his wall-of-worry. Twelve local energy suppliers in the UK have already failed, and if gas prices don't revert to historical averages, there will be more.
We are in a situation where there simply is not enough natural gas in the world to meet demand, and thus prices for it are skyrocketing. Correspondingly, values of companies that ship it - those cargoes can and often are delivered at the last minute as better price offers are received. That the ships quite literally turn around - are still not reflecting the new reality. I will buy more Flex LNG (FLNG) on any dip and will continue to. But as Wes Edens' New Fortress Energy (NFE) - another frequent RM recommendation of mine, and one that has finally started to work - recently purchased the LP part of Golar LNG (GLNG) and Teekay LNG (TGP) recently agreed to be acquired by private equity firm Stonepeak, you will see a virtuous circle. There aren't enough publicly traded LNG shippers out there...so, by God, don't sell the ones you already own!
I just found this very helpful index today - The UP World LNG Shipping Index is a market capitalization weighted index consisting of selected publicly traded securities (shares and units) from the LNG shipping sector, listed on the leading world stock exchanges - and it has been well and truly bookmarked across all my devices. This is awesome and I want to own every single one of these names. But many are only listed in Asia. The largest, Qatar Gas Transport (Nakilat), is actually listed in Doha, one of the few world cities where I haven't stopped by to have a drink and talk stocks - and there are several Japanese and Korean players, too. Also, you will find several LPs on the list, which I actually love, but require more diligence before ownership owing to tax consequences.
There just aren't enough LNG shipping common stocks to meet investor demand, so the prices for those that do exist will keep going up. Obviously keep playing the suppliers like Cheniere (LNG) and Tellurian (TELL) , and the pipeline companies like Antero Midstream (AM) and drillers like Antero Resources (AR) , but, by God, make sure you are buying LNG shippers before industry players and private equity titans snap them all up - at healthy takeover premia.
Whew! That was quite a rant... and I didn't even get to nuclear energy stock plays, which I will cover in my next RM column. But I don't think you need to have a telegraph message (the sound of which is copied in the outro to London Calling) to understand the point here. Buy LNG shipping stocks! Now!
