Joel Litman’s Perfect LNG Portfolio Revealed

Joel Litman is out with a new stock teaser to promote his newsletter Hidden Alpha.

In this presentation Litman hypes up what he calls "The Perfect LNG Portfolio."

Litman also hints that a "surprising July 25th twist could lead to Joe Biden's landslide re-election."

And he has a bunch of stocks that he wants you to invest in.

The good news is I was able to figure out the investments based on the clues in the presentation.

So no need to pay to see them.

I reveal them below and give you some information on each company so you can determine if it's a good investment or not.

Let's get started!

Overview Of The Teaser

Joel Litman of Hidden Alpha is out with a new teaser to sell his newsletter.

This time he's pitching LNG stocks which are pretty popular right now.

Before spending money to see the stocks let's see if we can figure them out first.

Here's a breakdown of the presentation and the clues in the teaser:

The Re-Election Of Joe Biden

The Perfect LNG Portfolio presentation starts out like so many do.. evoking the name of the current President.

When Trump was in office all the teasers were about him and now that Biden is in office the teasers are about him.

The theme here is despite Biden's poor performance as President, America will have a boom from a certain industry that will make America wealthy.

However, the downside to this new wealth will be 4 more years of Biden which Litman believes will give him a huge public mandate - which he'll use to transform the government towards socialism.

Joel Is Talking About Natural Gas

So what is this market that will lead to trillions in wealth for America?

Natural gas.

Joel draws connections to various times in American history where natural gas exploded and transformed America.

For example, in 1901 the Spindletop well system produced 100,000 barrels of oil per day.

Oil was very cheap then and it ignited the car industry. 

However, with these booms come a growing government.

Litman talks about Teddy Roosevelt using this time period to grow the government's powers.

This included passing the Square Deal and implementing an income tax.

Litman makes the point it's not even so much the politicians that want a growing government but the population demands more from the government.

The Future Is Not Oil, It's Natural Gas

Litman wants to get one thing straight.

He's not talking about oil.

He believes oil is a dying industry because the world is moving towards electric cars.

Joel also points to companies like Shell claiming their oil production peaked years ago and will continue to decline going forward.

Natural is different, though.

Natural gas is used in heating, electricity generation, chemicals and fertilizer.

Oil is produced by drilling into the ground where natural gas is produced through fracking.

The most important difference is natural gas burns cleaner than oil.

It emits 50% less carbon than oil and produces less sulfur dioxide, nitrogen, etc.

Additionally, natural gas emits less greenhouse gases compared to coal as well.

Coal makes up 20% of our electricity and 1/3rd of the world's electricity.

Green Energy Is Decades Away

It's definitely clear that large parts of the world are moving towards greener energy.

However, the technology and infrastructure just isn't there yet.

Windmills, batteries and solar will one day make up a large part of our energy grid but that's not happening for a while.

It's going to be decades before you see mass adoption of these technologies according to Joel Litman.

Revealing The Stocks

Alright at this point Joel Litman starts dropping hints about the companies that he's recommending.

The first stock he gives away for free is called Baker Hughes which provides equipment to LNG companies.

The next company Joel claims "about 50% of America's natural gas headed for export touches this firm’s pipeline." 

And that the CEO only makes $1 and "only makes money when the share price goes up and big dividends are paid."

This company is Kinder Morgan which is the biggest LNG pipeline company in America.

The next company produces natural gas in Marcellus and did not "hedge" future earnings.

Meaning if LNG prices rise their earnings will rise as well.

These clues point to Antero Resources. 

Lastly, the company that will benefit from the government growing from LNG is Lockheed Martin.

Lockheed Martin isn't involved in LNG and is instead the biggest government contractor in America.

The idea is if America grows so will Lockheed Martin.

So are these companies worth investing in?

We'll answer that in the next section.

Is The Perfect LNG Portfolio Worth Investing In?

At this point you probably want to know if these stocks are worth investing in.

Here's some facts about each company so you can determine this for yourself.

Baker Hughes

Baker Hughes (BKR) is an American multinational energy technology company that provides a range of services and products to the oil and gas industry.

Baker Hughes supplies LNG companies with different equipment that helps with LNG production, transportation and processing.

This includes turbomachinery that aids in the LNG liquefaction and regasification processes.

Additionally they provides LNG process technology used in LNG plant designs, LNG plant equipment (heat exchanges, cryogenic pumps, valves), and industrial software.

Beyond LNG they're involved in oilfield services that provides drilling, evaluation and completion services.

Here are some pros of investing in Baker Hughes:

• Exposure to LNG: LNG is going to grow into the future and they provide a lot of equipment to LNG companies which are expected to grow as well.
• Growth potential: It seems like the world will need more American LNG which Baker Hughes benefits from.
• Technological advancements: Baker Hughes is investing in new technologies to improve their operation.

Some negatives to investing in Baker Hughes includes:

• Volatility: The energy sector can be very volatile and LNG price fluctuations will directly impact Baker Hughes.
• Political issues: Litman paints LNG as inevitable but America has a hard time building new LNG infrastructure do to political and environmental concerns. Things seem pretty hostile to fracking at times. 

Kinder Morgan

Kinder Morgan plays a significant role in the energy industry by providing critical infrastructure for the transportation and storage of oil, natural gas, and other energy products.

They're one of the largest energy infrastructure companies in North America and the largest LNG pipeline company.

Kinder Morgan makes money by charging companies that use its pipelines and terminals.

Here's the pros of investing in this company:

• Steady income: Kinder Morgan experiences less volatility in the energy industry because of its business model. The fee based business model means stable and more predictable source of revenue.
• Diversification: Kinder Morgan operates in multiple segments within the energy industry, which can provide some level of diversification for an investor's portfolio.
• Dividends: Kinder Morgan is an income stock and has a current dividend payment of 6.4%.

On the downside:

• Debt: Kinder Morgan has a pretty significant amount of debt on their balance sheet. The debt is long term and at a fixed rate so short term interest rate fluctuations won't effect them. However, they've slashed dividends in the past to try and pay down some of the debt.
• Regulatory risk: Any industry that's highly regulated may run into operational and growth issues in the future. And gas pipelines is an industry that's effected a lot by politics.

Antero Resources

Antero Resources is a LNG company that's prevalent in the Marcellus Shale region in the Appalachian Basin.

Antero is one of the largest produces of LNG and they're known for their unconventional drilling techniques including horizontal drilling and fracking.

Some pros of investing in Antero includes:

• Vertical integration: Antero controls many aspects of its operations, including exploration, drilling, production, processing, and transportation. The company's midstream subsidiary, Antero Midstream, operates gathering and compression pipelines, processing plants, and water handling facilities that support Antero Resources' operations. This means greater control over costs and higher profit margins.
• Good management: Anetero's management team has a good track record.
• Major LNG player: Antero basically only focuses on LNG which means it'll grow fast if LNG really does take off.

Some negatives include:

• Volatility: Because Antero is so connected to LNG its business is effected by LNG prices. 
• Environmental concerns: The techniques Altero uses to produce natural gas like hydraulic fracturing is controversial and some say is very bad for the environment. States like NY have banned hydraulic fracking. 

Lockheed Martin

Last up we have Lockheed Martin.

This company isn't involved in LNG or energy and instead is Litman's pick to benefit from the growing government as a result of the wealth created by LNG.

Lockheed Martin is a massive government contractor that makes weapons, defense systems, aircrafts, satellites and more.

They produce the well known military aircrafts the F-35 and the F-16.

Here are some benefits to investing in this company:

• Biggest government contractor: It's pretty logical that if the government grows and spends more the biggest government contractor will get a piece of the action.
• Consistently growing dividend: Lockheed's dividend payments have been growing for 20 years straight.
• Diversified business: Lockheed operates in many different sectors which protects it.

On the downside:

• Bad reputation: Lockheed might make great weapons but the nature of their business isn't popular. Lockheed and many other defense contractors have become a boogey man to many people and this has hurt the reputation of this company.
• Premium priced stock: Lockheed's stock is almost $500 right now and because it's so well known and established it might be hard to reap big returns.

Recommended: The Best Place To Get Stock Picks

Conclusion

So that's the end of my post detailing Joel Litman's Perfect LNG Portfolio.

No need to buy his newsletters now (which I don't recommend buying anyway).

There's a lot of stock pickers pushing LNG stocks right now.

A big reason for this is the Russia/Ukraine war.

Europe is getting less Russian gas than ever before and America is expected to fill the void.

Additionally, the push for greener energy favors LNG as it burns cleaner than oil and coal.

So a bet on LNG seems pretty safe.

However there's things to keep in mind.

It takes a lot of money to create LNG infrastructure. 

For example, I covered another LNG presentation a couple months ago that was pitching LNG shipping tankers.

The company was Flex LNG and their ships can transport natural gas.

The cost for each ship is an astronomical $200 million, though.

And progressives are very hostile to drilling, new pipelines and fracking.

Who knows how long liberals will be in power but if they continue to rule for a long time they're going to make building new gas infrastructure very hard.

So it might be hard to find investors and people willing to front the capital necessary to complete these pricey projects.

We will see!

So what do you think?

Is LNG the future and do you like the companies Joel is pitching?

Let me know in the comments how you feel.