Jim Cramer’s Best Natural Gas Play (UNG, CHK)

Worldwide demand will turn the US into a “very big exporter” of natural gas, Cramer said on Monday’s Stop Trading!, especially as Washington remains uninterested in natgas as an alternative energy source. The future in exportation of natural gas appears strong, Cramer said, especially since President Barack Obama and Democrats are not interested in talking about it. “It’s going to be reflective of worldwide demand, not domstestic demand,” he said. “We have to create a world where we export.”

Cramer likes natgas as a long-term investment. He thinks there are two options to play natgas. One is United States Natural Gas (UNG), an etf for natural gas, but he prefers going with Oklahoma City, Okla.-based Chesapeake Energy Corporation (CHK).

See the full CNBC segment below:

The United States Natural Gas Fund, LP (UNG)
The United States Natural Gas Fund is an exchange traded fund that seeks to track (percentage wise) the price movements of natural gas prices. UNG units are bought and sold on the New York Stock Exchange.

The investment objective of UNG is for changes in the percentage terms of the units net asset value (nav) based on the natural gas prices as trade on the New York Mercantile Exchange. The price is based on the near month contract that’s set to expire, except when the near month contract is within 2 weeks of the expiration of the contract. At that point the natural gas futures contract will be “rolled” over into the next contract month.

First Trust ISE-Revere Natural Gas Index Fund (FCG)
The investment objective for First Trust ISE-Revere Natural Gas Index Fund (FCG) is to seek returns that correspond to the price and yield (before expenses) of the equity called the ISE- Revere Natural Gas Index.

The ISE- Revere Natural Gas Index ™. Is an equal-weighted index made up of exchange-listed companies that derive a substantial portion of the income form the exploration and production of natural gas. The index is constructed based on the total population of stocks listed in the United States of companies involved in the production and exploration of natural gas. Stocks of companies whose natural gas reserves do not meet certain requirements are not included in the index. Stocks are then ranked using four different methods. These methods include Price/Earning ratio, Price/Book ratio, Return on Equity and to correlation to natural gas futures prices. The rankings are then averaged and the top 30 stocks based on final rank are then selected for the index. The index is then rebalanced on a quarterly basis.

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