This Six-Pack Could Help Your Summer Stocks Sizzle

By Kurt Kasun | May 27, 2008 | 12:06 PM | 2 Comments

A La Nina weather pattern portends heat and hurricanes. Forecasters are predicting a very active hurricane season with one possibly forming in the western Caribbean already. Oppressive heat on the East and West coasts could have the air conditioning humming overtime, further draining natural gas and thermal coal supplies. Hurricanes will have an even bigger impact on the price for natural gas as supply is threatened throughout the gulf region.

Thermal coal could take lead over met coal again. I think investors will be rewarded by picking the two biggest US producers-Consol (CNX) and Peabody (BTU). These stocks broke out of a two year consolidation period around six months ago and show no signs of slowing their advance higher.

I am staying with two natural gas producers that served us well in the Noah's Ark portfolio. Chart patterns and seasonal fundamentals appear strong for Devon (DVN) and Range Resources (RRC).

The last group is related to the natural gas producers, but I believe has more upside potential. Both of the names I have selected recently broke two-year resistance levels and give us a second bite of the apple for a sector that soared from late 2003 into early 2006. The natural gas service companies stand to benefit from higher natural gas prices and new natural gas projects in North America. Nabors (NBR) is the world's largest on shore natural gas driller and Bronco Drilling (BRNC), a fund favorite back in 2005, is a smaller cap name that looks to regain its preferred status in the investment community.

According to US Global Advisor's Weekly Investment Alert:

"Canadian oil and gas drilling companies, reflecting newfound optimism among producers due to surging oil and gas prices, have boosted their forecast by 31 percent for wells to be completed this year. The Canadian Association of Oilwell Drilling Contractors said the increase is also a result of industry excitement over unconventional natural gas plays in British Columbia and Bakken oil prospects in Saskatchewan. The group now expects 18,087 wells will be completed in Canada this year, up from 13,735 wells forecasted in October of last year, Reuters reported."

These groups are strongly correlated as higher natural gas prices will induce electric companies to switch their power generation from natural gas over to steam coal. This portfolio is intended to last for the duration of the summer, and I will provide updates similar to those in the Noah's Ark series.

Note: Author holds positions in the names in the portfolio below: